Exhibit 4.2


 


THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY
NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH
RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER. SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED OR HYPOTHECATED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS
WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT.


 


 


SERIES B WARRANT


 


TO PURCHASE COMMON STOCK


 


OF


 


NEOMAGIC CORPORATION


 


 


	
  Issue Date:  August 20, 2004

  	
   

  	
  Warrant No. 2004-1B

  



 


THIS CERTIFIES that SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC or any
subsequent holder hereof (the “Holder”), has the right to purchase from
NEOMAGIC CORPORATION, a Delaware corporation (the “Company”), up to
1,000,000 fully paid and nonassessable shares of the Company’s common stock,
par value $0.001 per share (the “Common Stock”), subject to adjustment
as provided herein, at a price per share equal to the Exercise Price (as
defined below), at any time and from time to time beginning on the date that
this Warrant is originally issued (the “Issue Date”) and ending at 6:00
p.m., eastern time, on the date that is the ninetieth (90th) day following the
Effective Date (as defined in the Registration Rights Agreement) or, if such
date is not a Business Day, then on the Business Day immediately following such
date (the “Expiration Date”). 
This Warrant is issued pursuant to a Securities Purchase Agreement,
dated as of August 19, 2004 (the “Securities Purchase Agreement”).  Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Securities Purchase
Agreement.


 

















 


1.                                       Exercise.


 


(a)                                  Right
to Exercise; Exercise Price.  The
Holder shall have the right to exercise this Warrant at any time and from time
to time during the period beginning on the Issue Date and ending on the
Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the “Warrant Shares”). 
The “Exercise Price” for each Warrant Share purchased by the
Holder upon the exercise of this Warrant shall be equal to $1.60, subject to
adjustment for the events specified in Section 6 below.


 


(b)                                 Exercise
Notice.  In order to exercise this
Warrant, the Holder shall send by facsimile transmission, at any time prior to
6:00 p.m., eastern time, on the Business Day on which the Holder wishes to
effect such exercise (the “Exercise Date”), to the Company an executed
copy of the notice of exercise in the form attached hereto as Exhibit A (the “Exercise
Notice”), and a copy of the original Warrant, and, in the case of a Cash
Exercise (as defined below), shall forward to the Company the Exercise
Price.  The Exercise Notice shall also state the name or names (with address) in
which the shares of Common Stock that are issuable on such exercise shall be
issued.  In the
case of a dispute as to the calculation of the Exercise Price or the number of
Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section 6 below), the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and shall submit the disputed calculations to a certified public
accounting firm of national recognition (other than the Company’s independent
accountants) within two (2) Business Days following the date on which the
Exercise Notice is delivered to the Company. The Company shall cause such
accountant to calculate the Exercise Price and/or the number of Warrant Shares
issuable hereunder and to notify the Company and the Holder of the results in writing
no later than three (3) Business Days following the day on which such
accountant received the disputed calculations (the “Dispute Procedure”).
Such accountant’s calculation shall be deemed conclusive absent manifest
error.  The fees of any such accountant
shall be borne by the party whose calculations were most at variance with those
of such accountant.


 


(c)           Holder of Record.  The Holder shall, for all purposes, be
deemed to have become the holder of record of the Warrant Shares specified in
an Exercise Notice on the Exercise Date specified therein, irrespective of the
date of delivery of such Warrant Shares. 
Except as specifically provided herein, nothing in this Warrant shall be
construed as conferring upon the Holder hereof any rights as a stockholder of
the Company prior to the Exercise Date.


 


(d)                                 Cancellation
of Warrant.  This Warrant shall be
canceled upon its exercise and, if this Warrant is exercised in part, the
Company shall, at the time that it delivers Warrant Shares to the Holder
pursuant to such exercise as provided herein, issue a new warrant, and deliver
to the Holder a certificate representing such new warrant, with terms identical
in all respects to this Warrant (except that such new warrant shall be
exercisable into the number of shares of Common Stock with respect to which
this Warrant shall remain unexercised); provided, however, that the Holder shall
be entitled to exercise all or any portion of such new warrant at any time
following the time at which this Warrant is exercised, regardless of whether
the Company has actually issued such new warrant or delivered to the Holder a
certificate therefor.


 


2

















 


2.                                       Delivery
of Warrant Shares Upon Exercise. 
Upon receipt of an Exercise Notice pursuant to Section 1 above, the
Company shall, (A) in the case of a Cash Exercise no later than the close of
business on the later to occur of (i) the third (3rd) Business Day following
the Exercise Date set forth in such Exercise Notice and (ii) such later date on
which the Company shall have received payment of the Exercise Price, (B) in the
case of a Cashless Exercise (as defined below), no later than the close of
business on the third (3rd) Business Day following the Exercise Date set forth
in such Exercise Notice, and (C) with respect to Warrant Shares that are the
subject of a Dispute Procedure, the close of business on the third (3rd)
Business Day following the determination made pursuant to Section 1(b)
(each of the dates specified in (A), (B) or (C) being referred to as a “Delivery
Date”), issue and deliver or caused to be delivered to the Holder the
number of Warrant Shares as shall be determined as provided herein.  As long as the Company’s
transfer agent (“Transfer Agent”) participates in the Depository
Trust Company (“DTC”) Fast Automated Securities Transfer program (“FAST”),
and except as otherwise provided in the next following sentence of this
Section 2, the Company shall effect delivery of Warrant Shares to the
Holder by crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date.  In the event that the Transfer
Agent is not a participant in FAST, or if the Warrant Shares are not otherwise
eligible for delivery through FAST, or if the Holder so specifies in an
Exercise Notice or otherwise in writing on or before the Exercise Date, the
Company shall effect delivery of Warrant Shares by delivering to the Holder or
its nominee physical certificates representing such Warrant Shares, no later
than the close of business on such Delivery Date.


 


3.                                       Failure
to Deliver Warrant Shares.


 


(a)                                  In
the event that the Company fails for any reason to deliver to the Holder the
number of Warrant Shares specified in the applicable Exercise Notice on or
before the Delivery Date therefor (an “Exercise Default”), the Company
shall pay to the Holder payments (“Exercise Default Payments”) in the
amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price of
the Warrant Shares which are the subject of such Exercise Default multiplied
by (iii) the lower of fifteen percent (15%) and the maximum rate permitted
by applicable law (the “Default Interest Rate”), where “N” equals the
number of days elapsed between the original Delivery Date of such Warrant
Shares and the date on which all of such Warrant Shares are issued and
delivered to the Holder.  Cash amounts
payable hereunder shall be paid on or before the fifth (5th) Business Day of
each calendar month following the calendar month in which such amount has
accrued.


 


(b)                                 In
the event of an Exercise Default, the Holder may, upon written notice to the
Company (an “Exercise Default Notice”), regain on the date of such
notice the rights of the Holder under the exercised portion of this Warrant
that is the subject of such Exercise Default, in which case the Exercise Price
upon any subsequent exercise of such portion of this Warrant will be equal to
the lesser of (x) the lowest Exercise Price occurring during the period
beginning on related Delivery Date and ending on the date on which the Exercise
Default Notice is delivered to the Company and (y) the Exercise Price in effect
on the applicable Exercise Date (it being understood that the Holder may
deliver an Exercise Notice at any time following delivery of an Exercise
Default Notice to the Company).  In such
event, the Holder shall retain all of the Holder’s rights


 


3

















 


and remedies with respect to the Company’s failure to deliver such
Warrant Shares (including without limitation the right to receive the cash
payments specified in Section 3(a) above).


 


(c)                                  The
Holder’s rights and remedies hereunder are cumulative, and no right or remedy
is exclusive of any other.  In addition
to the amounts specified herein, the Holder shall have the right to pursue all
other remedies available to it at law or in equity (including, without limitation,
a decree of specific performance and/or injunctive relief). Nothing herein
shall limit the Holder’s right to pursue actual damages for the Company’s
failure to issue and deliver Warrant Shares on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of Common
Stock by the Holder to make delivery on a sale effected in anticipation of
receiving Warrant Shares upon exercise, such damages to be in an amount equal
to (A) the aggregate amount paid by the Holder for the Common Stock so
purchased minus (B) the aggregate amount of net proceeds, if any,
received by the Holder from the sale of the Warrant Shares issued by the
Company pursuant to such exercise).


 


4.                                       Exercise
Limitations.  In no event shall a
Holder be permitted to exercise this Warrant, or part hereof, if, upon such
exercise, the number of shares of Common Stock beneficially owned by the Holder
(other than shares which would otherwise be deemed beneficially owned except
for being subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section 4), would exceed 4.99% of the number of
shares of Common Stock then issued and outstanding. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules thereunder. To the
extent that the limitation contained in this Section 4 applies, the
submission of an Exercise Notice by the Holder shall be deemed to be the
Holder’s representation that this Warrant is exercisable pursuant to the terms
hereof and the Company shall be entitled to rely on such representation without
making any further inquiry as to whether this Section 4 applies. Nothing
contained herein shall be deemed to restrict the right of a Holder to exercise
this Warrant, or part thereof, at such time as such exercise will not violate
the provisions of this Section 4(a). 
This Section 4 may not be amended unless such amendment is approved
by the holders of a majority of the Common Stock then outstanding; provided,
however, that the limitations contained in this Section 4(a)
shall cease to apply (x) upon sixty (60) days’ prior written notice from the
Holder to the Company, or (y) immediately upon written notice from the Holder
to the Company at any time after the public announcement or other disclosure of
a Major Transaction (as defined below).


 


5.                                       Payment
of the Exercise Price; Cashless Exercise. 
The Holder may pay the Exercise Price in either of the following forms
or, at the election of Holder, a combination thereof:


 


(a)                                  through
a cash exercise (a “Cash Exercise”) by delivering immediately available
funds, or


 


(b)                                 through
a cashless exercise (a “Cashless Exercise”), as hereinafter
provided.  The Holder may effect a
Cashless Exercise by surrendering this Warrant to the Company and noting on the
Exercise Notice that the Holder wishes to effect a Cashless Exercise, upon
which the Company shall issue to the Holder the number of Warrant Shares
determined as follows:


 


4

















 


X = Y x (A-B)/A


 


where:                                                                                                             X
= the number of Warrant Shares to be issued to the Holder;


 


Y = the number of Warrant Shares with respect
to which this Warrant is being exercised;


 


A = the Market Price (as defined in the Certificate) as of the Exercise
Date; and


 


B = the Exercise Price.


 


For purposes of Rule 144, it is
intended and acknowledged that the Warrant Shares issued in a Cashless Exercise
transaction shall be deemed to have been acquired by the Holder, and the
holding period for the Warrant Shares required by Rule 144 shall be deemed to
have been commenced, on the Issue Date.


 


6.                                       Anti-Dilution
Adjustments; Distributions; Other Events. The Exercise Price and the number
of Warrant Shares issuable hereunder shall be subject to adjustment from time
to time as provided in this Section 6. 
In the event that any adjustment of the Exercise Price required herein
results in a fraction of a cent, the Exercise Price shall be rounded up or down
to the nearest one hundredth of a cent.


 


(a)                                  Subdivision
or Combination of Common Stock.  If
the Company, at any time after the Issue Date, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or
otherwise) the outstanding shares of Common Stock into a greater number of
shares, then effective upon the close of business on the record date for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced.  If the Company, at any time after the Issue Date, combines (by
reverse stock split, recapitalization, reorganization, reclassification or
otherwise) the outstanding shares of Common Stock into a smaller number of
shares, then, effective upon the close of business on the record date for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionally increased.


 


(b)                                 Distributions.  If the Company shall declare or make any
distribution of cash or any other assets (or rights to acquire such assets) to
holders of Common Stock, as a partial liquidating dividend or otherwise,
including without limitation any dividend or distribution to the Company’s
stockholders in shares (or rights to acquire shares) of capital stock of a
subsidiary) (a “Distribution”),
the Company shall deliver written notice of such Distribution (a “Distribution Notice”) to the
Holder at least thirty (30) days prior to the earlier to occur of (i) the
record date for determining stockholders entitled to such Distribution (the “Record
Date”) and (ii) the date on which such Distribution is made (the “Distribution
Date”).  In the Distribution Notice
to a Holder, the Company must indicate whether the Company has elected (A) to
deliver to such Holder the same amount and type of assets being distributed in
such Distribution as though the Holder were a holder on the Determination Date
therefor of a number of shares of Common


 


5

















 


Stock into which the this Warrant is exercisable as of such
Determination Date (such number of shares to be determined at the Exercise
Price then in effect and without giving effect to any limitations on such
exercise) or (B) to reduce the Exercise Price as of the Determination Date
therefor by an amount equal to the fair market value of the assets to be distributed
divided by the number of shares of Common Stock as to which such
Distribution is to be made, such fair market value to be reasonably determined
in good faith by the independent members of the Company’s Board of
Directors.  If the Company does not
notify the Holders of its election pursuant to the preceding sentence on or
prior to the Determination Date, the Company shall be deemed to have elected
clause (A) of the preceding sentence.


 


(c)                                  Major
Transactions.  In the event of a
merger, consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a
result of which shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities or other assets of the Company or another entity or the Company
shall sell all or substantially all of its assets (each of the foregoing being
a “Major Transaction”), the Company will give the Holder at least thirty
(30) days written notice prior to the earlier of (I) the closing or
effectiveness of such Major Transaction and (II) the record date for the
receipt of such shares of stock or securities or other assets, and: (i) the
Holder shall be permitted to exercise this Warrant in whole or in part at any
time prior to the record date for the receipt of such shares of stock or
securities or other assets and shall be entitled to receive, for each share of
Common Stock issuable to Holder for such exercise, the same per share
consideration payable to the other holders of Common Stock in connection with
such Major Transaction, and (ii) if and to the extent that the Holder retains
any portion of this Warrant following such record date, the Company will cause
the surviving or, in the event of a sale of assets, purchasing entity, as a
condition precedent to such Major Transaction, to assume the obligations of the
Company under this Warrant, with such adjustments to the Exercise Price and the
securities covered hereby as may be necessary in order to preserve the economic
benefits of this Warrant to the Holder.


 


(d)                                 Adjustments;
Additional Shares, Securities or Assets. 
In the event that at any time, as a result of an adjustment made
pursuant to this Section 6, the Holder of this Warrant shall, upon
exercise of this Warrant, become entitled to receive securities or assets
(other than Common Stock) then, wherever appropriate, all references herein to
shares of Common Stock shall be deemed to refer to and include such shares and/or
other securities or assets; and thereafter the number of such shares and/or
other securities or assets shall be subject to adjustment from time to time in
a manner and upon terms as nearly equivalent as practicable to the provisions
of this Section 6.  Any adjustment
made herein that results in a decrease in the Exercise Price shall also effect
a proportional increase in the number of shares of Common Stock into which this
Warrant is exercisable.


 


7.                                       Fractional
Interests.


 


No fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant, but on exercise of this Warrant,
the Holder hereof may purchase only a whole number of shares of Common
Stock.  If, on exercise of this Warrant,
the Holder hereof would be entitled to a fractional share of Common Stock or a
right to acquire a fractional share of Common Stock, the Company shall, in lieu
of issuing any such fractional share, pay to


 


6

















 


the Holder an amount in cash equal to the product resulting from
multiplying such fraction by the Market Price as of the Exercise Date.


 


8.                                       Transfer
of this Warrant.


 


The Holder may sell, transfer, assign, pledge or otherwise dispose of
this Warrant, in whole or in part, as long as such sale or other disposition is
made pursuant to an effective registration statement or an exemption from the
registration requirements of the Securities Act.  Upon such transfer or other disposition, the Holder shall deliver
this Warrant to the Company together with a written notice to the Company,
substantially in the form of the Transfer Notice attached hereto as Exhibit B
(the “Transfer Notice”), indicating the person or persons to whom this
Warrant shall be transferred and, if less than all of this Warrant is
transferred, the number of Warrant Shares to be covered by the part of this
Warrant to be transferred to each such person. Within three (3) Business Days
of receiving a Transfer Notice and the original of this Warrant, the Company
shall deliver to the each transferee designated by the Holder a Warrant or
Warrants of like tenor and terms for the appropriate number of Warrant Shares
and, if less than all this Warrant is transferred, shall deliver to the Holder
a Warrant for the remaining number of Warrant Shares.


 


9.                                       Benefits
of this Warrant.


 


This Warrant shall be for the sole and exclusive benefit of the Holder
of this Warrant and nothing in this Warrant shall be construed to confer upon
any person other than the Holder of this Warrant any legal or equitable right,
remedy or claim hereunder.


 


10.                                 Loss,
theft, destruction or mutilation  of
Warrant.


 


Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of this Warrant, and (in the case of loss, theft or destruction)
of indemnity reasonably satisfactory to the Company, and upon surrender of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.


 


11.                                 Notice
or Demands.


 


Any notice, demand or request required or permitted to be given by the
Company or the Holder pursuant to the terms of this Warrant shall be in writing
and shall be deemed delivered (i) when delivered personally or by verifiable
facsimile transmission, unless such delivery is made on a day that is not a
Business Day, in which case such delivery will be deemed to be made on the next
succeeding Business Day, (ii) on the next Business Day after timely delivery to
an overnight courier and (iii) on the Business Day actually received if
deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:


 


7

















 


If to the Company:


 


NeoMagic Corporation


3250 Jay Street


Santa Clara, California  95054


Attn:  Chief Financial Officer


Tel:  (408) 988-7020


Fax:  (408) 988-5196


 


with a copy to:


 


Wilson Sonsini Goodrich & Rosati


650 Page Mill Road


Palo Alto, CA 94304


Attn:                    Michael
J. Danaher, Esq.


Tel:                            (650)
493-9300


Fax:                           (650)
493-6811


 


and if to the Holder, to such address as shall be designated by the
Holder in writing to the Company.


 


12.                                 Applicable
Law.


 


This Warrant
is issued under and shall for all purposes be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.


 


13.                                 Amendments.


 


No amendment,
modification or other change to, or waiver of any provision of, this Warrant
may be made unless such amendment, modification or change is (A) set forth in
writing and is signed by the Company and the Holder and (B) agreed to in
writing by the holders of at least two-thirds (2/3) of the number of shares
into which the Warrants are exercisable (without regard to any limitation
contained herein on such exercise), it being understood that upon the
satisfaction of the conditions described in (A) and (B) above, each Warrant
(including any Warrant held by the Holder who did not execute the agreement
specified in (B) above) shall be deemed to incorporate any amendment,
modification, change or waiver effected thereby as of the effective date
thereof.


 


14.                                 Entire
Agreement.


 


This
Warrant, the Securities Purchase Agreement, the Certificate
of Designation, the
Registration Rights Agreement, and the other Transaction Documents constitute
the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof.  There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein.  This
Warrant, the Securities Purchase Agreement, the Certificate
of Designation, the
Registration Rights Agreement, and the other Transaction Documents supersede


 


8

















 


all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.


 


15.                                 Headings.


 


The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.


 


 


[Signature Page to Follow]


 


9

















 


IN WITNESS
WHEREOF, the Company has duly executed and delivered this Series B Warrant as
of the Issue Date.


 


 


	
   

  	
  NEOMAGIC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


10

















 


EXHIBIT A to SERIES B WARRANT


 


EXERCISE NOTICE


 


The undersigned Holder hereby irrevocably exercises the right to
purchase                of
the shares of Common Stock (“Warrant Shares”) of
                                                      
evidenced by the attached Series B Warrant (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.


 


1.                                       Form
of Exercise Price.  The Holder intends
that payment of the Exercise Price shall be made as:


 


            
a Cash Exercise with respect to
                                  
Warrant Shares; and/or


 


            
a Cashless Exercise with respect to
                                  
Warrant Shares, as permitted by Section 5(b) of the attached Warrant.


 


2.             Payment of Exercise
Price.  In the event that the Holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the Holder shall pay the sum of $                                
to the Company in accordance with the terms of the Warrant.


 


 


	
  Date: 

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  
	
   

  
	
  By:  

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


11

















 


EXHIBIT B to SERIES B WARRANT


 


TRANSFER NOTICE


 


FOR VALUE RECEIVED, the undersigned Holder of the attached Series B
Warrant hereby sells, assigns and transfers unto the person or persons named
below the right to purchase shares of the Common Stock of
                                          
evidenced by the attached Series B Warrant.


 


 


	
  Date: 

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  
	
   

  	
   

  
	
  By:  

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
  Transferee Name and Address:

  
	
   

  
	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  
	
   

  	
   

  
						



 


12