STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is dated as of January 11. 2012, and is entered into by and among each of the investors whose names are listed on Exhibit A hereto (each individually, an “Investor” and collectively, the "Investors") and NeoMagic Corporation, a Delaware corporation (the “Company”), with the Company and each of the Investors hereinafter being referred to collectively as the “Parties” and individually as a “Party.”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Act”), the Company desires to issue and sell to each Investor, and each Investor desires to purchase from the Company, common stock to be issued by the Company as more fully described below in this Agreement, including the exhibits hereto;

 

WHEREAS, the Company and each Investor are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(2) and/or Rule 505 of Regulation D (“Regulation D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the  Act;

 

WHEREAS, the Parties desire that, upon the terms and subject to the conditions contained herein, including payment by the Investors, in accordance with Exhibit A, of an aggregate consideration of up to One Hundred Sixty Thousand Dollars (U.S. $160,000.00), the Company shall issue and sell to Investors, and the Investors shall purchase up to Sixteen Million (16,000,000) shares of the Company’s common stock, par value $0.001 (the “Common Stock);

WHEREAS, the aggregate consideration payable by the Investors shall be based on a purchase price of One Cents ($.01) (the “Purchase Price”) for one share of Common Stock (the shares of Common Stock issued to the Investors pursuant to this Agreement shall be referred to in this Agreement as the "Stock"); and

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement the Parties may be executing and delivering other contemporaneous agreements executed by the Parties, which together with this Agreement  shall be collectively referred to as the “Transaction Documents”);

 

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto do hereby covenant, agree, represent and warrant as follows:

 

 

 

 

1.1   Incorporation of Recitals.  The recitals to this Agreement set forth above are hereby incorporated by reference into this Agreement. 

1.2 Purchase of Stock.  Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, each Investor agrees to purchase at the applicable Closing (as defined below) and the Company agrees to sell and issue to such Investor at the applicable Closing the Stock set forth opposite its name in Exhibit A hereto. 

1.3 Initial Closing Date.  The closing (the “Initial Closing”) of the purchase and sale of the Common Stock shall take place at 4:00 p.m., Pacific Time on January 11, 2012, subject to any required notification of satisfaction of the conditions to the Initial Closing set forth herein, or on such later date as is mutually agreed to by the Company and the Investors (the “Initial Closing Date”).  The Initial Closing shall occur on the Initial Closing Date at the offices of the Company at 2372-A Qume Drive, San Jose, California 95131(or such other place as is mutually agreed to by the Company and the Investors).

 

1.3 Subsequent Closings.  At the discretion of the Company, the Company may conduct one or more subsequent closings (each a “Subsequent Closing” and collectively with the Initial Closing, the “Closings” and each individually, a “Closing”) within 150 days of the Initial Closing Date.  Subject to the terms and conditions hereof, on the closing date of each Subsequent Closing (each a “Subsequent Closing Date”) the Company will issue and sell to each additional Investor, and each additional Investor will purchase, the Stock specified opposite the name of each such Investor added to Exhibit A.  Any such Investor shall become a party to this Agreement, and shall have the rights and obligations hereunder.  In the event that there is more than one Closing, the term Stock shall apply to all Stock sold and issued at each such Subsequent Closing.

 

1.4 Closing Deliveries. 

(a) At the Initial Closing, and each Subsequent Closing, the Company shall deliver or cause to be delivered to each Investor the following (the “Company Deliverable”):

 

(i) irrevocable instructions addressed to the Company’s transfer agent instructing it to issue a certificate or to make an appropriate book entry evidencing the Stock, registered in the name of such Investor;

 

(b)  At the Initial Closing, and each Subsequent Closing, each Investor shall deliver or cause to be delivered to the Company the consideration set forth opposite such Investor's name on Exhibit A, in immediately available funds, by wire transfer to the following bank account:

Except for the representations and warranties set forth in Section 2.1(b) which is being made only by Investors that are not employees of the Company, each of the Investors represents and warrants to the Company that, as of the date hereof and as of the applicable Closing:

2.1 Status of Investor.

(a)   Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Stock.

 

(b)   Investor is an “accredited investor” as defined in Rule 501(a) under the Act.  Such Investor is not a registered broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended (the "1934 Act").   

(c)  Investor is acquiring the Stock as principal for its own account for investment purposes only and not with a view to or with the intent of distributing or reselling such Stock or any part thereof, without prejudice, however, to such Investor’s right at all times  to sell or otherwise dispose of all or any part of such Stock in compliance with the one year holding period set forth in Rule 144 promulgated under the Act and in compliance with other applicable federal and state securities laws.  Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Stock for any period of time.  Such Investor is acquiring the Stock hereunder in the ordinary course of its business.  Such Investor does not have any agreement or understanding, directly or indirectly, with any person to distribute any of the Securities.

 

(d)  Investor has not directly or indirectly, nor has any person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitation, any short sales as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers (“Short Sales”) involving the Company’s securities) since the 30th day prior to the date of this Agreement.  Such Investor covenants that neither it nor any person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed.

 

2.2 Access to Information.  Investor has been furnished with such materials and has been given access to such information relating to the Company as it its representative has requested and has been afforded the full opportunity to ask questions regarding the Company and the Stock, all to the extent that the Investor has found necessary to make an informed decision regarding the Investor’s entering into this Agreement. In particular, Investor specifically confirms that all of the Company's filings, including its Form10-K's, 10-Q and 8-K's for 2007 through the date of October 31, 2010 hereof have been made available to the Investor at www.sec.gov.  Information for the period ending January 30, 2011 to the present is not available through the SEC due to the cessation of the Company’s required filings under the 1934 Act.  Investor also confirms that it has been advised that the proceeds of this offering are to be utilized as provided in Section 4.1 below.

 

 

2.3 Understanding of Risks Associated with the Acquisition of the Stock.  Investor understands that an investment in the Stock is speculative and subject to numerous risks, including but not limited to the risks set forth in the Company’s filings with the SEC under the heading “Risk Factors.” 

2.4 Understanding of Nature of Stock.  Investor understands that:

 

(a)  the Stock have not been registered by the Company under the Act or any State Act (as defined below), and the Company does not intend to register the Stock for sale under the Act or any State Act in reliance, among other things, on the exemptions from registration available under Regulation D and under Section 25102(f) of the California Corporate Securities Law of 1968, as amended.

 

(b)  the shares of Stock are “restricted securities” as that term is defined in Rule 144 under the Act. 

(c) the certificates, if any, evidencing the Stock shall include provisions substantially in the form of the legend set forth below, which Investor has read, understands and agrees to be bound by:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER APPLICABLE STATE SECURITIES ACTS (THE “STATE ACTS”). NOR IS SUCH REGISTRATION CONTEMPLATED.  SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR THE STATE ACTS, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE BOARD OF DIRECTORS OF THE COMPANY AND TO LEGAL COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE BOARD OF DIRECTORS AND SUCH COUNSEL SATISFACTORY EVIDENCE THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE ACT OR STATE ACTS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

 

(d) the Company may, from time to time, make stop transfer notations in the Company’s records to ensure compliance with the Act and any applicable State Acts.

 

(e) Investor agrees, prior to any transfer of the Stock, to give written notice to the Company expressing its desire to effect such transfer and describing briefly the proposed transfer.  Upon receiving such notice, the Company shall present copies thereof to counsel for the Company and the following provisions shall apply:

 

(i)            If, in the opinion of such counsel, the proposed transfer of such Stock may be effected without registration of such Stock under the Act and the State Acts, the Company shall promptly thereafter notify the person desiring to transfer such Stock, whereupon such person shall be entitled to transfer such Stock, all in accordance with the terms of the notice delivered by such person to the Company and upon such further terms and conditions as shall be required by the Company to ensure compliance with the Act and the State Acts.

 

(ii)           If, in the opinion of such counsel, the proposed transfer of such Stock may not be effected without registration of such Stock under the Act and the State Acts, a copy of such opinion shall be promptly delivered to the person who has proposed such transfer, and such proposed transfer shall not be made unless such registration is then in effect.

 

2.5   Investment Intent.  Investor represents and warrants that:

 

 

 

(a)     Investor is acquiring the Stock for the Investor’s own account and not on behalf of any other person.

The Company represents and warrants to each of the Investors that, as of the date hereof and as of the Initial Closing:

3.6 SEC Documents; Financial Statements.  During the two (2) years prior to the date hereof, the Company has not filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents").  True, correct and complete copies of the SEC Documents have been made available to the Investors through the EDGAR system.  As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

3.11 Internal Accounting and Disclosure Controls. Subject to the disclosures contained in the SEC Documents, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. Subject to the disclosures contained in the SEC Documents, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under the 1934 Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company's management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate.

 

5.1 Indemnification of the Company. The Investors recognizes that the Company’s entering into this Agreement will be based to a material extent upon the Investors' representations and warranties set forth herein and Investors agree to indemnify and hold harmless the Company and its officers, directors, counsel, employees and other agents from and against any and all loss, damages, liabilities or expenses including reasonable attorneys’ fees which any such person may incur by reason of or in connection with any misrepresentation made by Investors in this Agreement or otherwise, any breach by Investors of their agreements with the Company or any sale or distribution of any Stock by Investors in violation of the Act or State Acts.  All representations and warranties of Investors contained in this Agreement shall survive this Agreement.

5.2 Indemnification of Investors.  Subject to the provisions of this Section 5.2, the Company will indemnify and hold each Investor and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Investor (within the meaning of Section 15 of the Act and Section 20 of the 1934 Act), and the directors, officers, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a “Investor Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Investor Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or (b) any action instituted against an Investor, or any of them or their respective Affiliates (as defined under Rule 501 of Regulation D), by any stockholder of the Company who is not an Affiliate of such Investor, with respect to any of the transactions contemplated by this Agreement (unless such action is based upon a breach of such Investor’s representations, warranties or covenants under this Agreement or any agreements or understandings such Investor may have with any such stockholder or any violations by the Investor of state or federal securities laws or any conduct by such Investor which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Investor Party in respect of which indemnity may be sought pursuant to this Agreement, such Investor Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing.  Any Investor Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Investor Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Investor Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Investor Party under this Agreement to the extent it would incur an indemnity obligation pursuant to this Section 5.2 (i) for any settlement by a Investor Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Investor Party’s breach of any of the representations, warranties, covenants or agreements made by the Investors in this Agreement.

 

 

 

 

6.1 Captions and Headings. The Article and Section headings throughout this Agreement are for convenience of reference only and shall in no way be deemed to define, limit, or alter any provision of this Agreement.

2372-A Qume Drive, San Jose, California 95131

Attention: President and Chief Executive Officer; and

 To each Investor:

As set forth on Exhibit A

Any Party may change its address for purposes of this Section by giving notice as provided herein.

6.6 Counterparts.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when all counterparts have been signed by each Party and delivered to the other Parties; provided that a facsimile signature or signature represented in portable document format (pdf) or other image file shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original.

6.7  Independent Nature of Investors’ Obligations and Rights.  The obligations of each Investor under this Agreement are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement.  Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement.  Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.  Each Investor has been represented by its own separate legal counsel in their review and negotiation of this Agreement.

 

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties hereto as of the date first above written.

 

NEOMAGIC CORPORATION   By:                                                                                             Syed Zaidi, President and Chief Executive Officer

 

Date: January 11, 2012

Name and Address of Investor		Number of shares of Common Stock					Consideration to Be Paid at the Initial Closing

Date:

 

Name and Address of Investor		Number of shares of Common Stock					Consideration to Be Paid at the Subsequent Closing
Total