<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: [ ]
[ ] 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 Sections 240.14a-11(c) or
Sections 240.14a-12
GENERAL MAGIC, INC.
(Name of Registrant as Specified In Its Charter)
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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
May 8, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of GENERAL MAGIC, INC. on June 12, 1997 at the Sunnyvale Hilton Inn at 1250
Lakeside Drive, Sunnyvale, California 94086 at 2:00 p.m., Pacific Daylight
Savings Time.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. Also enclosed is a copy of the 1996 GENERAL MAGIC, INC. Annual
Report, which includes audited financial statements and certain other
information.
It is important that you use this opportunity to take part in the
affairs of GENERAL MAGIC, INC. by voting on the business to come before this
meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does not deprive you of your right to attend the
meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Steven Markman
Steven Markman
Chairman, Chief Executive Officer and President
<PAGE> 3
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of General
Magic, Inc. (the "Company"), which will be held on June 12, 1997, at 2:00 p.m.
Pacific Daylight Savings Time at the Sunnyvale Hilton Inn at 1250 Lakeside
Drive, Sunnyvale, California 94086, for the following purposes:
1. To elect three (3) directors to hold office until the 1998
Annual Meeting and until their successors are elected and
qualified.
2. To vote upon a proposal to increase by 275,000 shares the
aggregate number of shares issuable under the Company's 1994
Employee Stock Purchase Plan.
3. To vote upon a proposal to ratify the appointment of KPMG Peat
Marwick LLP as the independent auditors of the Company for the
fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on April 21, 1997, are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at the principal office of General Magic, Inc.
By Order of the Board of Directors,
/s/ Mary E. Doyle
MARY E. DOYLE
Secretary
Sunnyvale, California
May 8, 1997
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE REVOCABLE, AND
ANY STOCKHOLDER MAY WITHDRAW HIS OR HER PROXY PRIOR TO THE TIME IT IS VOTED, OR
BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE> 4
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of
General Magic, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held June 12, 1997, or any adjournment
thereof for the purposes set forth in the accompanying Notice of Annual Meeting.
The date of this Proxy Statement is May 8, 1997, the approximate date on which
this Proxy Statement and the accompanying form of proxy were first sent or given
to stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the year ended December 31, 1996,
is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
business on April 21, 1997, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 26,775,906 shares of Common
Stock of the Company, par value $.001 per share, issued and outstanding.
Stockholders may vote in person or by proxy. Each holder of shares of Common
Stock is entitled to one vote for each share of stock held on the proposals
presented in this Proxy Statement. The Company's bylaws provide that a majority
of all of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be borne
by the Company. The Company has retained Corporate Investor Communications, Inc.
to assist in the solicitation of proxies for a fee not to exceed $5,000, plus
customary out-of-pocket expenses. In addition, the Company will solicit
stockholders by mail through its regular employees, and will request banks and
brokers, and other custodians, nominees and fiduciaries, to solicit their
customers who have stock of the Company registered in the names of such persons
and will reimburse them for their reasonable, out-of-pocket costs. The Company
may use the services of its officers, directors, and others to solicit proxies,
personally or by telephone, without additional compensation.
Voting of Proxies. All valid proxies received prior to the meeting will
be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke his
or her proxy, at any time prior to the time it is voted, by delivery to the
Corporate Secretary of the Company at the Company's principal office, 420 North
Mary Avenue, Sunnyvale, California 94086, of a written instrument revoking the
proxy or a duly executed proxy with a later date, or by attending the meeting
and voting in person.
1
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company has a Board of Directors consisting of five (5)
directors, but effective as of this meeting, it will be reduced to consist of
three (3) directors. Management's nominees for election at the Annual Meeting of
Stockholders to the Board of Directors are Steven Markman, Carl F. Pascarella
and Roel Pieper. The Board thanks Marc Porat and Jerry Baker for their services
as directors.
If elected, Management's nominees will serve as directors until the
Company's Annual Meeting of Stockholders in 1998 and until their successors are
elected and qualified. If a nominee declines to serve or becomes unavailable to
serve for any reason, or if another vacancy occurs before the election (although
Management knows of no reason to anticipate that this will occur), the proxies
may be voted for such substitute nominee as Management may designate.
If a quorum is present and voting, the three (3) nominees for director
receiving the highest number of votes will be elected as directors. Abstentions
and shares held by brokers that are present but not voted because the brokers
were prohibited from exercising discretionary authority, i.e., "broker
non-votes," will be counted as present for purposes of determining if a quorum
is present.
The table below sets forth, for the current directors whose terms will
extend beyond this meeting and the nominees to be elected at this meeting,
certain information with respect to age and background.
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR NAME POSITION WITH THE COMPANY AGE SINCE
- - ------------------------------------------ ------------------------------------------- --- --------
<S> <C> <C> <C>
Steven Markman, Ph.D...................... Chairman, Chief Executive Officer, President 51 1996
and Acting Chief Financial Officer
Carl F. Pascarella........................ Director 54 1994
Roel Pieper, Ph.D......................... Director 41 1996
</TABLE>
Steven Markman joined the Company in September 1996 as Chairman, Chief
Executive Officer and President. In December 1996, Dr. Markman assumed the
responsibilities of Acting Chief Financial Officer of the Company. Prior to
joining the Company, Dr. Markman served as Executive Vice President and General
Manager of the Products Group of Novell, Inc. ("Novell") from January 1996 to
September 1996. Prior to that, Dr. Markman was Executive Vice President and
General Manager of the Information Access and Management Group at Novell from
August 1994 to January 1996. Dr. Markman served as Vice President of Engineering
at First Pacific Networks from March 1994 to August 1994, and was a principal at
Venture Consulting from September 1993 to March 1994. From February 1993 until
May 1993, Dr. Markman was acting Chief Executive Officer of Adaptive Corporation
which was merged with Network Equipment Technologies ("NET") in May 1993. Dr.
Markman served as Senior Vice President and General Manager of the Network
Systems Group of NET from April 1991 to May 1993.
Carl F. Pascarella has served as a director of the Company since
July 1994. Mr. Pascarella has been President and Chief Executive Officer of VISA
U.S.A. since September 1993, and served as President of VISA International's
Asia-Pacific region from 1983 until September 1993.
Roel Pieper has served as a director of the Company since
March 1996. Dr. Pieper has been Chief Executive Officer of Tandem Computers
Incorporated ("Tandem") since January 1996. From 1993 until he joined Tandem in
1996, Dr. Pieper served as President and Chief Executive Officer of Tandem's
wholly-owned subsidiary, UB Networks. Before joining UB Networks, Dr. Pieper was
President and Chief Executive Officer at AT&T's UNIX Systems Laboratories (USL)
from January 1991 to August 1993. From April 1981 to December 1990, Dr. Pieper
was Chief Technical Officer at Software, AG. Dr. Pieper is a member of the board
of directors of Lincoln National Corporation, Smart Valley, Unify, Veritas
Software and ViewSoft, as well as Tandem.
2
<PAGE> 6
BOARD OF DIRECTOR'S COMMITTEES AND MEETINGS
During the year ended December 31, 1996, the Board of Directors
held ten meetings. Each incumbent director attended at least 75% of the
aggregate of such meetings of the Board and any Committee of the Board on which
he served except Jerry Baker.
The Company has a Nominating Committee, an Audit Committee and a
Compensation Committee.
The Nominating Committee's function is to recommend from time to
time candidates for nomination for election as directors of the Company. The
members of the Nominating Committee at the end of fiscal 1996 were Messrs.
Markman, Pascarella and Pieper. During the year ended December 31, 1996, the
Nominating Committee held two meetings.
The Audit Committee's function is to review with the Company's
independent auditors and management the annual financial statements and
independent auditors' opinion, review the scope and results of the examination
of the Company's financial statements by the independent auditors, approve all
professional services and related fees of the independent auditors, recommend
the retention of the independent auditors to the Board, subject to ratification
by the stockholders, and periodically review the Company's accounting policies
and internal accounting and financial controls. The members of the Audit
Committee at the end of fiscal 1996 were Messrs. Baker, Pascarella and Pieper.
During the year ended December 31, 1996, the Audit Committee met once.
The Compensation Committee's function is to review and approve salary
levels and stock option grants for employees of the Company. The members of the
Compensation Committee at the end of fiscal 1996 were Messrs. Baker, Pascarella
and Pieper. During the year ended December 31, 1996, the Compensation Committee
held five meetings. For additional information concerning the Compensation
Committee, see "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION."
3
<PAGE> 7
PROPOSAL NO. 2
AMENDMENT OF 1994 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1994 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors of the Company in November 1994 and
approved by the stockholders of the Company in January 1995. As of April 17,
1997, a total of 151,017 shares of Common Stock had been issued under the
Purchase Plan and only 78,983 shares remained available for future purchases.
The Board of Directors believes that ability to participate in the
Purchase Plan is an important factor in assisting the Company to attract and
retain qualified employees essential to the success of the Company. Accordingly,
the Board of Directors has amended the Purchase Plan, subject to stockholder
approval, to make available an additional 275,000 shares of Common Stock under
the Purchase Plan. The Board of Directors believes that this amendment to the
Purchase Plan is in the best interests of the Company and its stockholders
because the additional shares are needed to ensure that the Company can continue
to operate the plan.
SUMMARY OF THE PROVISIONS OF THE PURCHASE PLAN
The following summary of the Purchase Plan is qualified in its entirety
by the specific language of the Purchase Plan, a copy of which is available to
any stockholder upon request.
General. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). Each participant in the Purchase Plan is granted at the
beginning of each offering under the plan (an "Offering") the right to purchase
through accumulated payroll deductions up to that number of shares of the Common
Stock of the Company (a "Purchase Right") determined on the first day of the
Offering. The Purchase Right is automatically exercised on the last day of each
purchase period during the Offering unless the participant has withdrawn from
participation in the Offering prior to such date.
Administration. The Purchase Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). Subject to the provisions of the Purchase Plan, the Board
determines the terms and conditions of Purchase Rights granted under the plan.
The Board will interpret the Purchase Plan and Purchase Rights granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Purchase Plan or any Purchase Rights.
Eligibility. Any employee of the Company or of any present or future
parent or subsidiary corporation of the Company designated by the Board for
inclusion in the Purchase Plan is eligible to participate in the plan so long as
the employee is customarily employed for at least 20 hours per week and five
months in each calendar year and is not a "highly compensated employee" within
the meaning of Section 414(q) of the Code holding an office of vice president or
higher, including the Company's chief executive officer and chief operating
officer. However, no employee who owns or holds options to purchase, or as a
result of participation in the Purchase Plan would own or hold options to
purchase, five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any parent or subsidiary
corporation of the Company is entitled to participate in the Purchase Plan. As
of March 31, 1997, approximately 106 employees were eligible to participate in
the Purchase Plan.
Shares Subject to Plan. Currently, no more than 230,000 of shares of
the Company's Common Stock may be issued under the Purchase Plan, subject to
appropriate adjustment in the event of a stock dividend, stock split, reverse
stock split, recapitalization, combination, reclassification or similar change
in the Company's capital structure or in the event of any merger, sale of assets
or other reorganization of the Company. However, as of April 17, 1997, only
78,983 shares remained available under the Purchase Plan. To provide a
sufficient number of shares for anticipated operation of the plan over the next
two years, the Board of Directors has amended the Purchase Plan, subject to
stockholder approval, to increase by 275,000 the maximum number of shares of
Common Stock issuable thereunder. If any Purchase Right expires or terminates,
the shares subject to the unexercised portion of such Purchase Right will again
be available for issuance under the Purchase Plan.
4
<PAGE> 8
Offerings. Generally, each Offering of Common Stock under the Purchase
Plan is for a period of 24 months (an "Offering Period"). A new Offering Period
generally commences on or about February 1 and August 1 of each year (an
"Offering Date"). Each Offering Period generally is comprised of four
consecutive six-month "Purchase Periods" ending on or about the last day of
January and July of each year, on which shares are purchased under the plan (a
"Purchase Date"). The Board may establish a different term for one or more
Offerings or different commencement or ending dates for any Offering Period or
Purchase Period.
Participation and Purchase of Shares. Participation in an Offering
under the Purchase Plan is limited to eligible employees who authorize payroll
deductions prior to the Offering Date. Payroll deductions may not exceed 10% (or
such other rate as the Board determines) of an employee's compensation on any
payday during the Offering Period. Once an employee becomes a participant in the
Purchase Plan, the employee will automatically participate in each successive
Offering Period until such time as the employee withdraws from the Purchase
Plan, becomes ineligible to participate, or terminates employment.
Subject to certain limitations, each participant in an Offering has a
Purchase Right equal to the lesser of (i) a number of whole shares determined by
dividing $50,000 by the fair market value of a share of Common Stock on the
Offering Date or (ii) that number of shares arrived at by dividing 10% of the
participant's "anticipated compensation" for the Offering Period by $8.40
(representing 60% of the offering price as set forth in the final prospectus
filed with the United States Securities and Exchange Commission in connection
with the Company's initial public offering of Common Stock). For this purpose, a
participant's "anticipated compensation" is determined by multiplying the
participant's compensation for the first payday following the Offering Date by
the number of paydays in the Offering Period. However, as required by Section
423 of the Code, the Purchase Plan provides that no participant may purchase
under the Purchase Plan shares of Common Stock having a fair market value
exceeding $25,000 in any calendar year (measured by the fair market value of the
Company's Common Stock on the Offering Date of the Offering Period in which the
shares are purchased).
On each Purchase Date during an Offering Period, the Company issues to
each participant in the Offering the number of shares of the Company's Common
Stock determined by dividing the amount of payroll deductions accumulated for
the participant during the Purchase Period by the purchase price, limited in any
case by the number of shares subject to the participant's Purchase Right for
that Offering. The price at which shares are sold under the Purchase Plan in any
Offering is established by the Board prior to the Offering Date but may not be
less than 85% of the lesser of the fair market value per share of the Company's
Common Stock on the Offering Date or on the Purchase Date. The fair market value
of the Common Stock on any relevant date generally will be the closing price per
share on such date as reported on the Nasdaq National Market. Any payroll
deductions under the Purchase Plan not applied to the purchase of shares will be
returned to the participant, unless the amount remaining is less than the amount
necessary to purchase an additional whole share of Common Stock, in which case
the remaining amount may be applied to the next Purchase Period.
A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future Offerings. However,
once a participant withdraws from an Offering, that participant may not again
participate in the same Offering. The Purchase Plan provides that if the fair
market value of a share of Common Stock on a Purchase Date (other than the final
Purchase Date of an Offering) is less than the fair market value on the Offering
Date, then after purchasing shares on that Purchase Date, each participant who
does not elect to remain in the old Offering will be withdrawn from the old
Offering and enrolled in the next Offering commencing under the plan.
Transfer of Control. The Purchase Plan defines as a "Transfer of
Control" of the Company any of the following events: (i) a merger or
consolidation in which the Company is not the surviving corporation, (ii) a
merger or consolidation in which the Company is the surviving corporation where
the stockholders of the Company before such merger or consolidation do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the Company's voting stock, (iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company, (iv) the direct or indirect sale
or exchange by the stockholders of the Company of all or substantially all of
the stock of the Company where the stockholders of the Company before such sale
or exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the Company's voting stock after such sale or exchange,
or
5
<PAGE> 9
(v) a liquidation or dissolution of the Company. Upon the occurrence of a
Transfer of Control, the Board may arrange with the surviving, continuing,
successor, or purchasing corporation (the "Acquiring Corporation") for the
Acquiring Corporation to assume the Company's rights and obligations under the
Purchase Plan. All Purchase Rights will terminate effective as of the date of
the Transfer of Control to the extent that they are neither exercised as of the
date of the Transfer of Control nor assumed by the Acquiring Corporation.
Termination or Amendment. The Purchase Plan will continue until
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may at any time amend or terminate the
Purchase Plan, except that the approval of the Company's stockholders is
required within twelve months of the adoption of any amendment increasing the
number of shares authorized for issuance under the Purchase Plan, or changing
the definition of the corporations which may be designated by the Board as
corporations the employees of which may participate in the Purchase Plan. No
termination or amendment of the Purchase Plan may adversely affect any
outstanding Purchase Right except as necessary to qualify the plan as an
employee stock purchase plan within the meaning of Section 423 of the Code.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PURCHASE PLAN
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the Purchase Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
Generally, there are no tax consequences to an employee of either
becoming a participant in the Purchase Plan or purchasing shares under the
Purchase Plan. The tax consequences of a disposition of shares vary depending on
the period such stock is held before its disposition. If a participant disposes
of shares within two years after the Offering Date or within one year after the
Purchase Date on which the shares are acquired (a "disqualifying disposition"),
the participant recognizes ordinary income in the year of disposition in an
amount equal to the difference between the fair market value of the shares on
the Purchase Date and the purchase price. Such income may be subject to
withholding of tax. Any additional gain or resulting loss recognized by the
participant from the disposition of the shares is a capital gain or loss. If the
participant disposes of shares at least two years after the Offering Date and at
least one year after the Purchase Date on which the shares are acquired, the
participant recognizes ordinary income in the year of disposition in an amount
equal to the lesser of (i) the difference between the fair market value of the
shares on the date of disposition and the purchase price or (ii) 15% of the fair
market value of the shares on the Offering Date. Any additional gain recognized
by the participant on the disposition of the shares is a capital gain. If the
fair market value of the shares on the date of disposition is less than the
purchase price, there is no ordinary income, and the loss recognized is a
capital loss. If the participant owns the shares at the time of the
participant's death, the lesser of (i) the difference between the fair market
value of the shares on the date of death and the purchase price or (ii) 15% of
the fair market value of the shares on the Offering Date is recognized as
ordinary income in the year of the participant's death.
If the exercise of the Purchase Right does not constitute an exercise
pursuant to an "employee stock purchase plan" under Section 423 of the Code, the
exercise of the Purchase Right will be treated as the exercise of a nonqualified
stock option. The participant would therefore recognize ordinary income on the
Purchase Date equal to the excess of the fair market value of the shares
acquired over the purchase price. Such income is subject to withholding of
income and employment taxes. Any gain or loss recognized on a subsequent sale of
the shares, as measured by the difference between the sale proceeds and the sum
of (i) the purchase price for such shares and (ii) the amount of ordinary income
recognized on the exercise of the Purchase Right, will be treated as a capital
gain or loss, as the case may be.
A capital gain or loss will be long-term if the participant holds the
shares for more than 12 months and short-term if the participant holds the
shares for 12 months or less. Both long-term and short-term capital gains are at
present generally subject to the same tax rates as ordinary income, except that
long-term capital gains are currently subject to a maximum tax rate of 28%.
6
<PAGE> 10
If the participant disposes of the shares in a disqualifying
disposition, the Company should be entitled to a deduction equal to the amount
of ordinary income recognized by the participant as a result of the disposition,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder. In all other cases, no deduction is allowed
the Company.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum, but will not be counted as having been voted on the
proposal.
The Board of Directors believes that approval of the increase in the
number of shares issuable under the Purchase Plan is in the best interests of
the stockholders and General Magic, Inc. for the reasons stated above.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL
OF AN INCREASE BY 275,000 IN THE AGGREGATE MAXIMUM NUMBER OF SHARES ISSUABLE
UNDER THE PURCHASE PLAN.
7
<PAGE> 11
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected KPMG Peat Marwick
LLP as independent auditors to audit the financial statements of the Company for
the fiscal year ending December 31, 1997. KPMG Peat Marwick LLP has acted in
such capacity since its appointment during the fiscal year ended December 31,
1990. A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if the representative
desires to do so, and is expected to be available to respond to appropriate
questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum, but will not be counted as having been voted on the
proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1997.
8
<PAGE> 12
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 28,
1997, with respect to the beneficial ownership of the Company's Common Stock by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director and director nominee of the
Company, (iii) the Chief Executive Officer, the four other highest compensated
executive officers of the Company whose salary and bonus for the year ended
December 31, 1996 exceeded $100,000, the former Chief Executive Officer and two
former executive officers of the Company whose salary and bonus for the year
ended December 31, 1996 exceeded $100,000 but who were not executive officers at
December 31, 1996 (the "Named Executive Officers"), and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) SHARES OWNED(2)
- - -------------------------------------------------------------------------------- --------------------------------
NUMBER OF PERCENTAGE OF
SHARES CLASS
-------------- ---------------
5% STOCKHOLDERS
<S> <C> <C>
Trimark Financial Corporation(3) ............................................... 2,243,400 8.4%
One First Canadian Place
Suite 5600, P. O. Box 487
Toronto, Ontario M5XIE5
Sony Corporation(4) ............................................................ 1,778,940 6.7
6-7-35 Kitashinagawa
Shinagawa-ku
Tokyo, 141 Japan
Andrew J. Hertzfeld(5) ......................................................... 1,579,350 5.9
OFFICERS AND DIRECTORS
Steven Markman, Ph.D.(6) ....................................................... 135,000 *
Martha E. Coleman .............................................................. -- *
Anthony M. Rutkowski............................................................ -- *
Steven D. Schramm(7) ........................................................... 41,921 *
James E. White ................................................................. 110,150 *
Jerry Baker, Ph.D.(8) .......................................................... 5,417 *
Carl F. Pascarella(9) .......................................................... 13,750 *
Roel Pieper, Ph.D.(10) ......................................................... 5,417 *
Marc U. Porat, Ph.D.(11) ....................................................... 1,023,457 3.8
Robert G. Kelsch(12)........................................................... -- *
Executive officers and directors as a group (14 persons)(13).................... 1,335,112 5.0
</TABLE>
- - ------------------
* Less than 1%
(1) Except as otherwise indicated, the address of each beneficial owner is
in care of the Company at 420 North Mary Avenue, Sunnyvale, California
94086.
(2) Except as indicated in the footnotes to this table, the Company believes
that the persons named in the table have sole voting and dispositive power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.
9
<PAGE> 13
(3) According to Amendment No. 1 to Schedule 13G filed with the Securities and
Exchange Commission (the "Commission") on February 7, 1997, Trimark
Financial Corporation has sole power to vote and dispose of all 2,243,400
shares.
(4) According to Amendment No. 1 to Schedule 13G filed with the Commission on
February 13, 1997, Sony Corporation has sole power to vote and dispose of
all 1,778,940 shares.
(5) Mr. Hertzfeld disclaims beneficial ownership of 100,000 shares registered
in the name of Maurice S. Hertzfeld, as Trustee of the Bruce Hertzfeld
Trust, the Ilene Hertzfeld Trust and the Robert Hertzfeld Trust, and
Raymond Kelly, as Trustee of the Joyce McClure Trust. Mr. Hertzfeld
resigned as Vice President and Chief Technical Officer, Magic Cap
Technology in December 1996.
(6) Includes 135,000 shares of restricted stock, of which 67,500 shares will
vest in September 1997 and 67,500 will vest in September 1998, assuming Dr.
Markman's continued employment with the Company.
(7) Includes 28,021 shares subject to stock options exercisable within 60 days
of February 28, 1997.
(8) Includes 5,417 shares subject to stock options exercisable within 60 days
of February 28, 1997.
(9) Includes 13,750 shares subject to stock options exercisable within 60 days
of February 28, 1997.
(10) Includes 5,417 shares subject to stock options exercisable within 60 days
of February 28, 1997.
(11) Dr. Porat disclaims beneficial ownership of 3,718 shares registered in the
name of Ruth Myra Porat, as Custodian for Jason Marc Elliott, and 3,718
shares registered in the name of Ruth Myra Porat, as Custodian for Liana
Marian Elliott.
(12) Mr. Kelsch resigned as the Company's President and Chief Operating Officer
in September 1996.
(13) Includes 52,605 shares subject to stock options exercisable within 60 days
of February 28, 1997 and 135,000 shares of restricted stock owned by Dr.
Markman. Does not include any shares owned by David Duckworth, who resigned
from the Company on March 28, 1997.
10
<PAGE> 14
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the total
compensation of the Named Executive Officers for the years ended December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------- --------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S) OPTIONS COMPENSATION
--------------------------- ---- ------ ----- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven Markman, Ph.D.(1)...................... 1996 $77,307 $60,000(2) 135,000(3) 1,500,000(4) $50,000(5)
Chairman, Chief Executive Officer,
President and Acting Chief Financial
Officer
Martha E. Coleman(6).......................... 1996 93,462 57,750(2) -- 260,000(7) --
Vice President, Corporate Marketing
Anthony M. Rutkowski(8)....................... 1996 133,961 57,750(2) -- 340,000(9) --
Vice President, Internet Business
Development
Steven D. Schramm............................. 1996 148,365 72,250(2) -- 210,000(10) --
Vice President and General Manager, 1995 136,365 51,363(11) -- 37,500 --
Communication Products Division 1994 114,731 10,356(12) -- 62,500 --
James E. White................................ 1996 141,346 59,575(2) -- 127,500(13) --
Vice President and Chief Technical 1995 134,904 30,625(11) -- -- --
Officer, Agent Technology 1994 127,346 22,521(12) -- 67,500 --
Former Officers:
Andrew J. Hertzfeld(14) 1996 130,326 26,250(2) -- -- --
Vice President and Chief Technical 1995 135,096 36,000(11) -- -- --
Officer, Magic Cap Technology 1994 139,712 35,000(12) -- -- --
Robert G. Kelsch(15).......................... 1996 121,846 50,000(2) -- 250,000(16) --
President and Chief Operating Officer 1995 36,923 -- 250,000 --
Marc Porat, Ph.D.(17)......................... 1996 141,345 -- -- -- 175,000(18)
Chief Executive Officer 1995 175,481 93,750(11) -- -- --
1994 199,085 75,000(12) -- -- --
</TABLE>
(1) Dr. Markman joined the Company in September 1996.
(2) Includes bonuses earned, but not paid in fiscal 1996.
(3) As part of his compensation arrangement, the Company granted Dr.
Markman the right to acquire 135,000 shares of restricted Common
Stock. In March 1997, Dr. Markman exercised his right and acquired the
restricted stock. 67,500 shares of the restricted stock will vest in
September 1997 and 67,500 shares of the restricted stock will vest in
September 1998, assuming Dr. Markman's continued employment with the
Company.
11
<PAGE> 15
(4) Includes an option for 750,000 shares of Common Stock which were
repriced in November 1996, replacing options for an aggregate of
750,000 shares granted earlier in the year. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
(5) Represents payment for costs incurred in connection with Dr. Markman's
employment transition.
(6) Ms. Coleman joined the Company in April 1996.
(7) Includes options for an aggregate of 130,000 shares of Common Stock
which were repriced in November 1996, replacing options for an
aggregate of 130,000 shares granted earlier in the year. See "REPORT OF
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
(8) Mr. Rutkowski joined the Company in January 1996.
(9) Includes options for an aggregate of 100,000 shares of Common Stock
which were repriced in February 1996, replacing options for an
aggregate of 100,000 shares granted earlier in the year, and options
for an aggregate of 120,000 shares of Common Stock which were repriced
in November 1996, replacing options for an aggregate of 120,000 shares
granted earlier in the year. See "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(10) Includes options for an aggregate of 37,500 shares of Common Stock
which were repriced in February 1996, replacing options for an
aggregate of 37,500 shares granted in 1995, and options for an
aggregate of 142,500 shares of Common Stock which were repriced in
November 1996, replacing options for 67,500 shares granted in 1996,
62,500 shares granted in 1994 and 12,500 shares granted in 1993. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
REPRICING OF OPTIONS."
(11) Includes bonuses earned, but not paid in fiscal 1995.
(12) Includes bonuses earned, but not paid in fiscal 1994.
(13) Includes options for an aggregate of 97,500 shares of Common Stock
which were repriced in November 1996, replacing options for an
aggregate of 30,000 shares granted in 1996 and an aggregate of 67,500
shares granted in 1994. See "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(14) Mr. Hertzfeld resigned as Vice President and Chief Technical Officer,
Magic Cap Technology in December 1996, and resigned from the Company in
March 1997.
(15) Mr. Kelsch joined the Company in October 1995 and resigned in
September 1996.
(16) Includes options for an aggregate of 250,000 shares of Common Stock
which were repriced in February 1996, replacing options for an
aggregate of 250,000 shares granted in fiscal 1995. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
(17) Dr. Porat resigned as the Company's President and Chief Executive
Officer in September 1996.
(18) Represents consulting fees earned subsequent to Dr. Porat's
resignation.
12
<PAGE> 16
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended December 31, 1996 to the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS IN FISCAL 1996
--------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
GRANTED TO APPRECIATION FOR
EMPLOYEES OPTION TERM(3)
OPTIONS IN FISCAL EXERCISE EXPIRATION ------------------------------
NAME GRANTED(1) YEAR PRICE(2) DATE 5% 10%
- - ---------------------------- ------------ -------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven Markman, Ph.D....... 750,000 10.1% $3.7500 09/13/06 $1,768,766 $4,482,401
750,000(4)(5) 10.1 2.8438 11/12/06 1,342,267 3,402,103
Martha E. Coleman.......... 100,000 1.3 5.0000 04/17/06 314,447 796,871
30,000 0.4 6.1250 06/14/06 115,559 292,850
100,000(4)(6) 1.3 2.8438 11/12/06 178,969 453,614
30,000(4)(6) 0.4 2.8438 11/12/06 53,691 136,084
Anthony M. Rutkowski....... 100,000 1.3 10.5000 01/05/06 660,339 1,673,430
100,000(7)(8) 1.3 7.4375 02/27/06 467,740 1,185,346
20,000 0.3 6.1250 06/14/06 77,040 195,233
100,000(4)(9) 1.3 2.8438 11/12/06 178,969 453,614
20,000(4)(9) 0.3 2.8438 11/12/06 35,794 90,723
Steven D. Schramm.......... 37,500(7)(10) 0.5 7.4375 02/27/06 175,403 444,505
30,000 0.4 6.1260 06/14/06 115,559 292,850
12,500(4)(11) 0.2 2.8438 11/12/06 22,371 56,702
5,000(4)(11) 0.1 2.8438 11/12/06 8,948 22,681
3,750(4)(11) 0.1 2.8438 11/12/06 6,711 17,011
10,000(4)(11) 0.1 2.8438 11/12/06 17,897 45,361
22,500(4)(11) 0.3 2.8438 11/12/06 40,268 102.063
21,250(4)(11) 0.3 2.8438 11/12/06 38,031 96,393
30,000(4)(11) 0.4 2.8438 11/12/06 53,691 136,084
37,500(4)(11) 0.5 2.8438 11/12/06 67,113 170,105
James E. White............. 30,000 0.4 6.1250 06/14/06 115,559 292,850
67,500(4)(12) 0.9 2.8438 11/12/06 120,804 306,189
30,000(4)(12) 0.4 2.8438 11/12/06 53,691 136,084
Former Officers:
Andrew J. Hertzfeld........ -- -- -- -- -- --
Robert G. Kelsch........... 250,000(7)(13) 3.4 7.4375 02/27/06 1,169,351 2,963,365
Marc U. Porat, Ph.D........ -- -- -- -- -- --
</TABLE>
- - ------------------------
(1) Generally, initial grants of options granted in 1996 under the
Company's Amended and Restated 1990 Stock Option Plan (the "Option
Plan") vest at the rate of one-fourth on the first anniversary of the
optionee's date of hire and 1/48 per month thereafter for each full
month of the optionee's continuous employment with the Company;
subsequent
13
<PAGE> 17
option grants generally vest over a four year period at the
rate of one fourth on the first anniversary of the date of grant and
1/48 per month thereafter for each full month of the optionee's
continuous employment with the Company. Under the Option Plan, the
Board retains discretion to modify the terms of outstanding options.
(2) All options were granted at an exercise price equal to the fair
market value of the Common Stock on the date of grant.
(3) Potential gains are net of exercise price, but before taxes associated
with the exercise. These amounts represent certain hypothetical gains
based on assumed rates of appreciation, based on the Securities and
Exchange Commission's rules, and do not represent the Company's
estimate or projection of future Common Stock prices. Actual gains, if
any, on stock option exercises are dependent on the future performance
of the Company, overall market conditions and the optionees' continued
employment through the vesting period. The amounts reflected in this
table may not be achieved.
(4) In November 1996, as a result of the continued decline in the fair
market value of the Company's Common Stock, the Compensation Committee
determined it was in the best interests of the Company to offer all
current option holders the opportunity to exchange outstanding options
with an exercise price above the then current trading price for options
with an exercise price equal to the then current fair market value.
Under the Committee's action, optionees who agreed to the cancellation
of their outstanding options received in exchange a new option
exercisable for the same number of shares with an exercise price of
$2.8438 per share, the fair market value of the Company's Common Stock
on November 12, 1996, the date of the exchange. Vesting continued in
accordance with the terms of the forfeited option. Messrs. Markman,
Rutkowski, Schramm and White, and Ms. Coleman, participated in the
exchange. For details concerning the repricing of options, see the
"TEN-YEAR OPTION REPRICINGS" table and "REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(5) Reflects options which were repriced in November 1996, replacing
options granted in September 1996.
(6) Reflects options which were repriced in November 1996, replacing
options granted in April and June 1996.
(7) In February 1996, as a result of a broad decline in the fair market
value of the Company's stock, the Compensation Committee determined
that it was in the best interests of the Company to offer to all
current option holders the opportunity to exchange outstanding options
with an exercise price above the then current trading price for options
with an exercise price equal to the then current fair market value.
Under the Committee's action, optionees who agreed to the cancellation
of their outstanding options received in exchange a new option
exercisable for the same number of shares with an exercise price of
$7.4375 per share, the fair market value of the Company's Common Stock
on February 27, 1996, the date of the exchange. Vesting began for the
new options on the date of the exchange. Therefore, in effect,
optionees who agreed to the exchange received a lower exercise price
and gave up any vesting accrued through the date of their canceled
options. Messrs. Rutkowski and Schramm participated in the exchange.
For details concerning the repricing of options, see the "TEN-YEAR
OPTION REPRICINGS" table and "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
(8) Reflects options which were repriced in February 1996, replacing
options granted in January 1996.
(9) Reflects options which were repriced in November 1996, replacing
options granted in February and June 1996.
(10) Reflects options which were repriced in February 1996, replacing
options granted in September and November 1995.
(11) Reflects options which were repriced in November 1996, replacing
options granted in October 1993, February 1994, August 1994, September
1994, October 1994, December 1994, February 1996 and June 1996.
(12) Reflects options which were repriced in November 1996, replacing
options granted in March 1994 and June 1996.
(13) Reflects options which were repriced in February 1996, replacing
options granted in October 1995.
14
<PAGE> 18
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock during the year
ended December 31, 1996, and unexercised options held as of December 31, 1996,
by the Named Executive Officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/96 OPTIONS AT 12/31/96(1)
------------------------------- ---------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(2) EXERCISABLE(3) UNEXERCISABLE(3) EXERCISABLE(4) UNEXERCISABLE(4)
- - ------------------------------- ------------ ----------- ------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Steven Markman, Ph.D....... -- -- -- 750,000 -- --
Martha E. Coleman.......... -- -- -- 130,000 -- --
Anthony M. Rutkowski....... -- -- -- 120,000 -- --
Steven D. Schramm.......... 10,000 $42,250 22,708 143,542 $28,617 $1,055
James E. White............. 10,000 58,375 75,000 97,500 165,938 --
Former Officers:
Andrew J. Hertzfeld........ -- -- -- -- -- --
Robert G. Kelsch........... -- -- -- -- -- --
Marc U. Porat, Ph.D........ -- -- -- -- -- --
</TABLE>
- - ------------------------
(1) Based on the per share closing price of $2.3125, as reported on the
Nasdaq National Market, on December 31, 1996, less exercise price.
(2) Fair market price on date of exercise, less exercise price.
(3) Includes options granted at an exercise price greater than the per
share closing price of $2.3125, as reported on the Nasdaq National
Market, on December 31, 1996.
(4) Does not include options that had an exercise price greater than the
per share closing price of $2.3125, as reported on the Nasdaq National
Market, on December 31, 1996.
15
<PAGE> 19
The following table provides the specified information concerning all
repricings of options to purchase the Company's Common Stock held by any
executive officer of the Company since February 9, 1995, the date of the
Company's initial public offering:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL OPTION
SECURITIES MARKET PRICE TERM REMAINING
UNDERLYING OF STOCK AT EXERCISE AT DATE OF
OPTIONS TIME OF PRICE AT TIME NEW REPRICING OR
NAME AND REPRICING REPRICED REPRICING OR OF REPRICING EXERCISE AMENDMENT
POSITION DATE OR AMENDED (#) AMENDMENT($) OR AMENDMENT (#) PRICE ($) (MONTHS)
- - -------------------------- ------------- -------------- ------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven Markman, Ph.D. 11/12/96(1) 750,000 $2.8438 $3.7500 $2.8438 118
Chairman of the Board,
Chief Executive
Officer, President and
Acting Chief Financial
Officer
Martha E. Coleman 11/12/96(1) 48,000 2.8438 5.0000 2.8438 113
Vice President, 52,000 2.8438 5.0000 2.8438 113
Corporate Marketing 30,000 2.8438 6.1250 2.8438 115
Anthony M. Rutkowski 2/27/96(2) 29,333 7.4375 10.5000 7.4375 118
Vice President, 70,667 7.4375 10.5000 7.4375 118
Internet Business
Development
11/12/96(1) 20,000 2.8438 6.1250 2.8438 115
29,333 2.8438 7.4375 2.8438 112
70,667 2.8438 7.4375 2.8438 112
Steven D. Schramm 2/27/96(2) 10,000 7.4375 16.3125 7.4375 114
Vice President and 27,500 7.4375 14.3125 7.4375 116
General Manager,
Communication Products 11/12/96(1) 12,500 2.8438 6.0000 2.8438 83
Division 5,000 2.8438 8.5000 2.8438 87
3,750 2.8438 9.5000 2.8438 93
10,000 2.8438 9.5000 2.8438 94
22,500 2.8438 9.5000 2.8438 96
7,750 2.8438 9.5000 2.8438 97
13,500 2.8438 9.5000 2.8438 97
5,484 2.8438 6.1250 2.8438 115
24,516 2.8438 6.1250 2.8438 115
10,000 2.8438 7.4375 2.8438 112
27,500 2.8438 7.4375 2.8438 112
James E. White 11/12/96(1) 23,750 2.8438 9.5000 2.8438 89
Vice President and 43,750 2.8438 9.5000 2.8438 89
Chief Technical 14,232 2.8438 6.1250 2.8438 115
Officer, Agent 15,768 2.8438 6.1250 2.8438 115
Technology
Mary E. Doyle 11/12/96(1) 47,554 2.8438 5.9375 2.8438 116
General Counsel and 52,446 2.8438 5.9375 2.8438 116
Secretary
Jeffrey F. McElroy 11/12/96(1) 47,555 2.8438 5.9375 2.8438 116
Vice President and 12,445 2.8438 5.9375 2.8438 116
General Manager, 90,000 2.8438 4.4531 2.8438 116
Internet Applications
and Services
Elena M. Morera 11/12/96(1) 45,632 2.8438 6.1875 2.8438 116
Vice President, Human 4,368 2.8438 6.1875 2.8438 116
Resources
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL OPTION
SECURITIES MARKET PRICE TERM REMAINING
UNDERLYING OF STOCK AT EXERCISE AT DATE OF
OPTIONS TIME OF PRICE AT TIME NEW REPRICING OR
NAME AND REPRICING REPRICED REPRICING OR OF REPRICING EXERCISE AMENDMENT
POSITION DATE OR AMENDED (#) AMENDMENT($) OR AMENDMENT (#) PRICE ($) (MONTHS)
- - -------------------------- ------------- --------------- ------------- ---------------- ------------ ---------------
Former Executive
Officers(3):
<S> <C> <C> <C> <C> <C> <C>
David P. Duckworth(4) 11/12/96(1) 85,330 2.8438 3.7500 2.8438 119
64,670 2.8438 3.7500 2.8438 119
Lucia Hicks-Williams(5) 2/27/96(2) 9,008 7.4375 16.3125 7.4375 114
40,992 7.4375 16.3125 7.4375 114
39,950 7.4375 14.3125 7.4375 116
Robert G. Kelsch(6) 2/27/96(2) 29,333 7.4375 14.8250 7.4375 115
220,667 7.4375 14.8250 7.4375 115
Dennis R. Raney(7) 2/27/96(2) 29,334 7.4375 13.6875 7.4375 118
120,666 7.4375 13.6875 7.4375 118
</TABLE>
(1) Options that were repriced in November 1996 continue to vest in
accordance with their original vesting schedule provided that the
exchanged options may not be exercised until the earlier of (i) six
months from the date of the repricing or (ii) the date the optionee is
involuntarily terminated by the Company. See also "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON REPRICING OF
OPTIONS."
(2) Options that were repriced in February 1996 generally provided for
vesting at a rate of 25% on the first anniversary of the date of
repricing and 2.08% each month thereafter, and optionees forfeited any
accrued vesting on their canceled options. Such options held by persons
still employed by the Company were further repriced in November 1996.
See also "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON REPRICING OF OPTIONS."
(3) None of the options granted to these former executive officers of the
Company were exercised by such former officers.
(4) Mr. Duckworth resigned as the Company's Vice President, Worldwide Field
Operations in March 1997.
(5) Ms. Hicks-Williams resigned as the Company's Vice President and
General Manager, Active Internet Products Division in September 1996.
(6) Mr. Kelsch resigned as the Company's President and Chief Operating
Officer in September 1996.
(7) Mr. Raney resigned as the Company's Vice President, Finance and
Administration, Chief Financial Officer and Secretary in May 1996.
17
<PAGE> 21
COMPENSATION OF DIRECTORS.
The directors of the Company did not receive any cash compensation for
their services as members of the Board of Directors of the Company in the year
ended December 31, 1996. The Company's 1994 Outside Directors Stock Option Plan,
as amended (the "Directors Plan") provides for initial and annual automatic
grants of nonqualified stock options to directors of the Company who are not
employees of the Company or of any affiliated corporation. However, any
nonemployee director will be ineligible to participate in the Directors Plan if
the director's employer is a stockholder of the Company or an affiliated
corporation of a stockholder of the Company, or if the director's employer holds
a technology license from the Company or is an affiliated corporation of such
license holder. During the fiscal year ended December 31, 1996, each of Messrs.
Baker and Pieper received an initial option grant for 20,000 shares of Common
Stock under the Directors Plan on March 28, 1996, with an exercise price of
$5.875. As a result of the stockholders' approval of an amendment to the
Directors Plan, on May 23, 1996, Messrs. Baker and Pieper received an automatic
grant for 20,000 shares of Common Stock under the Directors Plan, and Mr.
Pascarella received an automatic grant for 15,000 shares of Common Stock under
the Directors Plan, each with an exercise price of $5.625. On July 7, 1996, Mr.
Pascarella received an automatic option grant for 10,000 shares of Common Stock
under the Directors Plan with an exercise price of $6.4375.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
In September 1996, the Company entered into an employment agreement
with Steven Markman commencing September 19, 1996. Dr. Markman serves as the
Company's Chairman of the Board of Directors, President and Chief Executive
Officer for an annual salary of $300,000, and during the first of twelve months
of his employment, a guaranteed bonus of not less than twenty percent (20%) of
Dr. Markman's then current salary. In accordance with his employment agreement,
the Company granted Dr. Markman options for 750,000 shares of the Company's
Common Stock. See EXECUTIVE COMPENSATION AND OTHER MATTERS -- "Option Grants in
Last Fiscal Year." In addition, as further required by his employment agreement,
the Company granted Dr. Markman the right to purchase up to 135,000 restricted
shares of the Company's Common Stock at a price of $0.10 per share. Dr. Markman
exercised this right in March 1997. Either party may terminate the employment
agreement at any time, provided that, if prior to September 19, 2000, the
Company terminates the agreement other than for cause or Dr. Markman resigns for
good reason (as defined in the agreement), then (i) Dr. Markman will be entitled
to receive his final salary rate for the remaining term of the agreement,
provided such period of salary continuance will not be less than one year or
more than two years, as well as any bonus he would otherwise have earned in the
year of his termination, and (ii) all restricted stock and all stock options
previously granted to Dr. Markman by the Company will continue to vest during
the period of salary continuance, and such stock options will remain exercisable
for a period of 18 months following the later of the date Dr. Markman is
terminated as the Company's Chief Executive Officer or the date of such option
vesting. If Dr. Markman's employment is terminated by the Company without cause
or if Dr. Markman resigns for good reason during the period beginning 30 days
prior to the first public announcement that the Company has entered into an
agreement that would result in a change in control (as defined in the agreement)
and ending one year following the change in control, Dr. Markman is entitled to
the same benefits described in the preceding sentence, except that all of his
unvested outstanding stock options and restricted stock will be immediately
vested.
Effective September 19, 1996, Marc Porat resigned as the Company's
Chief Executive Officer and Chairman of the Board of Directors. The Company
entered into a consulting agreement with Dr. Porat effective October 1, 1996
through September 30, 1997. Under the agreement, Dr. Porat will act as a
consultant to the Company and be paid a monthly consulting fee of $58,333 from
October 1, 1996 through December 31, 1996 and $19,444 from January 1, 1997
through September 30, 1997. Dr. Porat is no longer an employee of the Company.
In connection with the employment of Ms. Doyle and Ms. Morera, the
Company agreed that if it terminates either of them prior to August 1997 for any
reason other than for just cause or upon their death, disability or voluntary
resignation, each of Ms. Doyle and Ms. Morera would be entitled to a
continuation of their base salary for a period of six months, such amount to be
reduced by the base salary received by either of them from a third party during
that period.
18
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In each of September 1992 and May 1993, the Company loaned Dr. Porat
$55,000 at interest rates of 5.98% and 5.38% per annum, respectively, pursuant
to promissory notes originally due in 1999 and 2000. In connection with Dr.
Porat's resignation from the Company, the promissory notes were amended to
reflect that the loans are due on December 31, 1997 and that Dr. Porat is
obligated under one note and Ms. Slater, Dr. Porat's former wife, is obligated
under the other note.
In April 1996, the Company loaned Mr. White $130,000 at an interest
rate of 5.26% per annum, pursuant to a promissory note due in July 1996. Mr.
White repaid the loan in full in June 1996.
The Company has entered into indemnification agreements with each of
its officers and directors containing provisions that may require the Company,
among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as officers or
directors (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified and to obtain directors' and
officers' insurance if available on reasonable terms. The Company maintains an
insurance policy covering officers and directors of the Company under which the
insurer has agreed to pay the amount of any claim made against the officers or
directors of the Company that such officers or directors may otherwise be
required to pay or for which the Company is required to indemnify such officers
and directors, subject to certain exclusions. The policy has a coverage limit
of $15,000,000.
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, directors and persons who
beneficially own more than 10% of the Company's Common Stock to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with, except
that initial statements of beneficial ownership of securities for Jerry Baker,
Jeffrey F. McElroy, Elena M. Morera, Roel Pieper, Dennis R. Raney and John C.
Zimmerman were not timely filed. One statement of changes in beneficial
ownership for director and former officer Marc Porat was not timely filed
reporting an aggregate of seven transactions.
CHANGES TO BENEFIT PLAN.
The Board of Directors has amended the 1994 Employee Stock Purchase
Plan (the "Purchase Plan"), subject to stockholder approval, to increase by
275,000 the number of shares reserved for issuance under the Purchase Plan from
230,000 to 505,000 shares. See "PROPOSAL No. 2 -- AMENDMENT OF 1994 EMPLOYEE
STOCK PURCHASE PLAN." As of the date of this proxy statement, none of the
additional shares have been purchased under the Purchase Plan. Non-employee
directors are not eligible to participate in the Purchase Plan. No employee
purchased more than 5% of the total stock purchased under the Purchase Plan.
Purchases under the Purchase Plan are made at the discretion of participants.
ACCORDINGLY, FUTURE PURCHASES UNDER THE PURCHASE PLAN ARE NOT YET DETERMINABLE.
19
<PAGE> 23
The following table summarizes the amount of benefits received by
various persons under the Option Plan and the Purchase Plan since the inception
of such plans through the year ended December 31, 1996.
<TABLE>
<CAPTION>
PURCHASE PLAN
-----------------------------------
EXERCISE PRICE NO. OF SHARES
NAME AND POSITION (PER SHARE) PURCHASED
----------------- ---------------- ---------------
<S> <C> <C>
Steven Markman,Ph.D.................................................................. -- --
Chairman, Chief Executive Officer, President and Acting Chief Financial Officer
Martha E. Coleman.................................................................... -- --
Vice President, Corporate Marketing
Anthony M. Rutkowski................................................................. -- --
Vice President, Internet Business Development
Steven D. Schramm.................................................................... -- --
Vice President and General Manager, Communication Products Division
James E. White....................................................................... -- --
Vice President and Chief Technical Officer, Agent Technology
Andrew J. Hertzfeld.................................................................. -- --
Former Vice President and Chief Technical Officer, Magic Cap Technology
Robert G. Kelsch..................................................................... -- --
Former President and Chief Operating Officer
Marc U. Porat, Ph.D.................................................................. -- --
Former Chief Executive Officer
Executive Group (9 persons).......................................................... -- --
Non-Executive Director Group (4 persons)............................................. -- --
Non-Executive Officer Employee Group................................................. From $3.825 151,017
to $11.90
</TABLE>
20
<PAGE> 24
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS
In February 1996, the Compensation Committee considered the options
held by the Company's executive officers and employees and the fact that a broad
decline in the price of the Common Stock of the Company had resulted in a
substantial number of stock options granted pursuant to the Company's Amended
and Restated 1990 Stock Option Plan (the "Option Plan") having exercise prices
well above the recent historical trading prices of the Common Stock. The
Committee was advised by management that management believed that employee
turnover was likely to increase in part because the Company's total compensation
package for long-term employees, which included substantial options with
exercise prices well above the then current trading price, was less attractive
than compensation offered by other companies in the same geographic location,
since options granted to new hires at other companies would be granted at
current trading prices.
The Committee believed that (i) the Company's success in the future
would depend in large part on its ability to retain a number of its highly
skilled technical and managerial personnel, (ii) that competition for such
personnel would be intense, (iii) that the loss of key employees could have a
significant adverse impact on the Company's business, and (iv) that it would be
important and cost-effective to provide equity incentives to employees and
executive officers of the Company to improve the Company's performance and the
value of the Company for its stockholders. The Committee considered granting new
options to existing employees at fair market value, but recognized that the size
of the option grants required to offset the decline in market price would result
in significant additional dilution to stockholders and that such grants would
potentially exceed the option reserve, resulting in a potential charge to
earnings if the price at the time of the stockholders meeting was greater than
the price at the time the grants were approved. The Committee recognized that an
exchange of existing options with exercise prices higher than fair market value
for options at fair market value would provide additional incentives to
employees because of the increased potential for appreciation. The Committee
also recognized that it could require the new options to be subject to new
vesting restrictions so that optionees participating in the exchange would have
incentives to remain with the Company. Considering these factors, the Committee
determined it to be in the best interests of the Company and its stockholders to
restore the incentives for employees and executive officers to remain as
employees of the Company and to exert their maximum efforts on behalf of the
Company by granting replacement stock options under the Option Plan at the
optionee's election, with restarted vesting and exercise prices equal to current
market value.
Accordingly, in February 1996, the Committee approved an offer to all
employees of the Company, including executive officers, to exchange outstanding
options with exercise prices above the then current trading price for options
with an exercise price equal to the current trading price, with vesting
commencing on the date of the exchange. The Committee approved a new four year
vesting schedule for the exchanged options. All exchanged options will terminate
no later than ten (10) years from the date of the exchange. Accordingly,
optionees who participated in the exchange received a lower exercise price in
exchange for their forfeiture of accrued vesting on their exchanged options. The
offer to exchange options was completed in March 1996; options for 1,597,183
shares with exercise prices ranging from $8.50 to $16.75 were exchanged for
options for an equal number of shares at an exercise price of $7.4375, the fair
market value of the Company's Common Stock on February 27, 1996, the date of the
Committee's approval of the repricing. See EXECUTIVE COMPENSATION AND OTHER
MATTERS -- "Ten-Year Option Repricings" table for further information concerning
the repricing.
In November 1996, as a result of the continued decline in the price of
the Company's Common Stock, the Compensation Committee reviewed the options held
by the Company's executive officers and employees and the fact that a
substantial number of stock options granted pursuant to the Option Plan,
including those repriced in February 1996, had exercise prices well above the
recent historical trading prices of the Common Stock. The Committee was advised
by management that management believed that employee turnover was likely to
remain high because the employees held options with exercise prices
significantly higher than the then current trading price of the Company's Common
Stock.
21
<PAGE> 25
The Committee again considered all of the factors it had considered in
connection with the repricing in February 1996, as well as the reduction of
approximately one-quarter of the Company's work force in October 1996 related to
the change in the Company's strategy and the need to retain and motivate its
employees during this transition period. The Committee determined it to be in
the best interests of the Company and its stockholders to restore the incentives
for employees and executive officers to remain as employees of the Company and
to exert their maximum efforts on behalf of the Company by granting replacement
stock options under the Option Plan at the optionee's election, with exercise
prices equal to current market value. In light of the repricing of stock options
in February 1996 in which optionees who participated in the exchange forfeited
all accrued vesting on their exchanged options, the Committee decided that
vesting on the exchanged options should continue in accordance with the vesting
schedule of the forfeited options; provided, however, that exchanged options may
not be exercised until the earlier of (i) six months from the date of the
repricing or (ii) the date the optionee is involuntarily terminated by the
Company.
Accordingly, in November 1996, the Committee approved an offer to all
employees of the Company, including executive officers, to exchange outstanding
options with exercise prices above the then current trading price for options
with an exercise price equal to the current trading price, with vesting
continuing in accordance with the vesting schedule of the forfeited option. All
exchanged options will terminate no later than ten (10) years from the date of
the exchange. Optionees who participated in the exchange received a lower
exercise price on their exchanged options, subject to a restriction on the
exercise of such options. The offer to exchange options was completed in
November 1996; options for 2,948,846 shares with exercise prices ranging from
$3.1875 to $16.6250 were exchanged for options for an equal number of shares at
an exercise price of $2.8438, the fair market value of the Company's Common
Stock on November 12, 1996, the date of the Committee's approval of the
repricing. See EXECUTIVE COMPENSATION AND OTHER MATTERS -- "Ten-Year Option
Repricings" table for further information concerning the repricing.
COMPENSATION COMMITTEE
Carl F. Pascarella
Jerry Baker
Roel Pieper
22
<PAGE> 26
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
three non-employee directors. No member of the Compensation Committee is a
current or former officer or employee of the Company. The Compensation Committee
is responsible for setting and administering policies governing compensation of
executive officers, including the annual Executive Bonus Plan and the Amended
and Restated 1990 Stock Option Plan (the "Option Plan"). In addition, the
Compensation Committee reviews compensation levels of other management level
employees, evaluates the performance of management and reviews other
compensation-related issues.
COMPENSATION PHILOSOPHY.
The Company applies a consistent compensation philosophy for all its
employees, including its executive officers. The Company's compensation policy
is designed to enable the Company to attract, retain and reward executive
officers who are likely to contribute to the long-term success of the Company.
The Compensation Committee also believes that a strong correlation should exist
between executive compensation, business objectives and overall Company
performance, and seeks to design its total compensation package to elicit the
highest degree of productivity and commitment from all executive officers.
COMPONENTS OF COMPENSATION.
There are three components of the Company's executive compensation
program which support the goal of aligning compensation with the value created
for the Company's stockholders while providing incentives to further the
Company's strategic objectives: base salary, performance based bonuses and stock
options.
Base Salary.
The Compensation Committee strives to offer salaries to its executive
officers which are competitive with salaries offered by companies of similar
size and capitalization in the software industry. Base salaries are reviewed on
an annual basis and are subject to adjustment based upon the individual's
contribution to the Company and changes in salary levels offered by comparable
companies. In determining the salaries of the executive officers, the
Compensation Committee considers information provided by the Company's Chief
Financial Officer and Director of Human Resources, as well as salary surveys and
similar data available from independent sources.
Marc U. Porat co-founded the Company and served as Chief Executive
Officer from the Company's inception in May 1990 to September 1996. Dr. Porat's
1996 compensation, including a base salary of $175,481, was set by the
Compensation Committee in 1995 and was not adjusted during 1996. In September
1996, the Company recruited a new Chief Executive Officer, Steven Markman. The
Committee based Dr. Markman's salary on negotiations with him to join the
Company and recognition of the significant responsibilities he assumed in
developing and implementing a new strategy for the Company.
The Chief Executive Officer is responsible for evaluating the
performance of all other executive officers and recommends salary adjustments
which are reviewed and approved by the Compensation Committee. Performance
evaluations for individual executive officers in 1996 were based on
predetermined individual goals approved by the Chief Executive Officer. In
addition to considering the results of the performance evaluations and
information concerning competitive salaries, the Compensation Committee and the
Chief Executive Officer placed significant weight on the financial condition of
the Company in considering salary adjustments.
Bonuses.
Beginning in 1996, target amounts of cash bonuses for each executive
officer under the Company's Executive Bonus Plan are set annually by the
Compensation Committee and are specifically weighted for identified financial,
management, strategic and operational goals. Performance against the established
goals is determined annually by the Compensation Committee and, based on such
determination, the Committee approves payment of appropriate bonuses. The
Compensation Committee set Dr. Porat's achievable bonus for 1996 at $175,000.
Upon
23
<PAGE> 27
reviewing Dr. Porat's performance with regard to quarterly performance
objectives, weighted among specific personal and corporate objectives, the
Compensation Committee determined not to award a bonus to Dr. Porat, the
Company's Chief Executive Officer through September 1996. Dr. Markman, as part
of his agreement with the Company, is entitled during the first twelve months
of his employment, to a guaranteed bonus of at least twenty percent (20%) of
his then current salary. Pursuant to this agreement, Dr. Markman accrued a
bonus of $60,000 in 1996. Bonuses accrued in 1996 under the plan for other
executive officers, as of the end year, represented between 12.15% and 38.19%
of the total compensation of such officers.
Equity Incentives.
The Committee believes that employee equity ownership is highly
motivating, provides a major incentive to employees in building stockholder
value and serves to align the interests of employees with the interests of the
Company's stockholders. In determining the amount of equity compensation to be
awarded to executive officers in any fiscal year, the Committee considers the
position of the officer, the current stock ownership of the officer, the stock
ownership of other officers of the Company, the number of shares which continue
to be subject to vesting under outstanding options, the compensation paid by
other similarly situated companies to their executive officers and the expected
future contribution of the officer to the Company's performance. The Committee
gives primary weight to the officer's position and expected future
contributions.
The Compensation Committee considered it important to provide equity
incentives to Dr. Markman as he develops and implements the Company's new
business strategy. The Committee therefore granted Dr. Markman options for
750,000 shares that vest over a four-year period, as well as the right to
purchase 135,000 restricted shares of the Company's Common Stock at a price of
$0.10 per share, which he exercised in March 1997. Dr. Porat was not granted any
options during 1996. Option grants during 1996 are described under the heading
"EXECUTIVE COMPENSATION AND OTHER MATTERS" in the table entitled "OPTION GRANTS
IN LAST FISCAL YEAR."
DEDUCTIBILITY OF EXECUTIVE COMPENSATION.
The Company has considered the amendments to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and related regulations
of the Internal Revenue Service that restrict the deductibility for federal
income tax purposes of executive compensation paid to the chief executive
officer and each of the four other most highly compensated executive officers at
the end of any fiscal year to the extent such compensation exceeds $1,000,000
for any of such officers in any year and does not qualify for an exception under
the statute or regulations. Qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are satisfied. In
November 1996, the Compensation Committee determined that in order to retain and
motivate key officers of the Company, it was in the best interests of the
Company and its stockholders to amend the Option Plan to eliminate the limit on
the number of shares for which options may be granted to any employee in a
fiscal year. As a result of this amendment, the Option Plan does not qualify for
an exception from the deduction limit. The Committee does not believe that the
Company's compensation will be likely to exceed $1,000,000 annually for any
executive officer in the foreseeable future and, therefore, concluded that the
amendment to the Option Plan was necessary at this time. In the future, the
Committee will continue to evaluate the advisability of not qualifying its
executive compensation for such deductibility. The Committee's policy is to
qualify its executive compensation for deductibility under applicable tax laws
as practicable.
COMPENSATION COMMITTEE
Carl F. Pascarella
Jerry Baker
Roel Pieper
24
<PAGE> 28
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
Companies) ("Nasdaq US") and the H&Q Total Return Technology Index ("H&Q Index")
for the period commencing on February 9, 1995(1) and ending on December 31,
1996.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
FEBRUARY 9, 1995 THROUGH DECEMBER 31, 1996(2)
GENERAL MAGIC, INC., NASDAQ US AND H&Q INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Feb. 9, 1995 Dec. 29, 1995 Dec. 31, 1996
------------ ------------- -------------
<S> <C> <C> <C>
General Magic $100.00 $75.89 $16.52
Nasdaq US $100.00 $135.14 $166.24
H&Q Index $100.00 $142.44 $170.91
</TABLE>
(1) The Company's initial public offering commenced on February 10, 1995.
For purposes of this presentation, the Company has assumed that its
initial offering price of $14.00 would have been the closing sales
price on February 9, 1995, the day prior to commencement of trading.
(2) Assumes that $100.00 was invested on February 9, 1995 in the Company's
Common Stock at the Company's initial offering price of $14.00 and at
the closing sales price for each index on that date and that all
dividends were reinvested. No dividends have been declared on the
Company's Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder returns.
25
<PAGE> 29
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 420 North Mary Avenue, Sunnyvale, California 94086, not later
than January 8, 1998, and satisfy the conditions established by the Securities
and Exchange Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Mary E. Doyle
MARY E. DOYLE
Secretary
May 8, 1997
26
<PAGE> 30
GENERAL MAGIC, INC.
PROXY 420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven Markman and Mary E. Doyle as
Proxies, each with the power to appoint a substitute, and hereby authorizes
them to represent and to vote as designated on the reverse side, all the shares
of common stock of General Magic, Inc. held of record by the undersigned on
April 21, 1997, at the Annual Meeting of Stockholders to be held on June 12,
1997 at 2:00 P.M. local time, at the Sunnyvale Hilton Inn, 1250 Lakeside Drive,
Sunnyvale, California 94086, or any adjournment thereof.
[SEE REVERSE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) SIDE]
<PAGE> 31
[X] Please mark
votes as in
this example.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder of General Magic, Inc. If no direction is
taken this proxy will be voted for Proposals 1, 2 and 3.
1. Election of Directors
Nominees: Steven Markman, Carl F. Pascarella, Roel Pieper
FOR WITHHELD
[ ] [ ]
[ ] MARK HERE
-------------------------------------- FOR ADDRESS [ ]
For all nominees except as noted above CHANGE AND
NOTE BELOW
2. To increase by 275,000 the aggregate maximum number of shares issuable
under the Company's 1994 Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the appointment of KPMG Peat Marwick LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. At their discretion, the proxies are authorized to vote upon other business
as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears to the left. When shares are held in joint
tenancy, all of such persons should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature Date Signature Date
----------------- ---------- ---------------- --------
