Product Joint Development Agreement - Toshiba Corp. and NeoMagic Corp.


                      PRODUCT JOINT DEVELOPMENT AGREEMENT

This Agreement is made as of January 21 , 1997 (Effective Date) by and between
Toshiba Corporation, a Japanese corporation, with executive offices at 1-1,
Shibaura 1-chome, Minato-ku, Tokyo 105-01, Japan ("Toshiba") and NeoMagic
Corporation ("NeoMagic"), a Delaware corporation, with offices at 3260 Jay
Street, Santa Clara, California 95054.

                                   RECITALS

          Whereas, NeoMagic or its wholly (100%) owned companies (including but
not limited to NeoMagic International Corporation, hereinafter referred to as
"Associated Companies") have developed and own certain proprietary semiconductor
technologies enabling the integration of microcontroller logic cells and memory
cells on a single semiconductor device as well as certain proprietary
technologies with respect to microcontroller logic cell itself;

          Whereas, Toshiba has developed and owns certain proprietary
technologies with respect to memory modules; and

          Whereas, NeoMagic desires to collaborate with Toshiba and Toshiba is
ready to accept to collaborate with NeoMagic to jointly develop integrated
circuit chip by using of both technologies, under the terms and conditions of
this Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties agree as follows:

                                    PART I
                                  DEFINITIONS

I.1       "Cell Set Library" means a number of primitive logic elements, such as
          invertors, buffers, NAND, AND, NOR, XOR, SNOR, AND/OR and OR/AND
          gates, adders muxs, comparators, latches and flip-flops, all designed
          using a fixed cell height so as to be usable with commercially
          available standard cell automatic place and route software tools.

I.2       "DRAM Module" means a 20Mbit or larger dynamic random access memory
          module designed on Toshiba's proprietary 64M DRAM second generation
          process and developed hereunder by Toshiba.

I.3       "Logic Portion" means collectively the logic circuity described in
          Exhibit III.

I.4       "Product(s)" means the integrated circuit chip (whether in bear wafer
          or assembled) to be jointly developed by NeoMagic or its Associated
          Companies and Toshiba hereunder, which chip is to include a DRAM
          Module and Logic Portion in a single chip.


                       Confidential Treatment Requested


 
                                    PART II
                            DEVELOPMENT OF PRODUCTS

II.1      Soon after the Effective Date, both parties shall discuss and
          establish a schedule including interim milestones for the development
          of Products to be performed in accordance with the procedures
          described in this Part II, which schedule may be modified or adjusted
          upon mutual agreement of both parties. Both parties shall use their
          good faith, reasonable best efforts to develop the Products and to
          provide the other party with the results of its development efforts
          such as appropriate design database and situation environments, in
          accordance with such schedule.

II.2      Toshiba shall provide NeoMagic with Toshiba's technical information
          for HSO. 4um base dRAMASIC, as listed in Exhibit I attached hereto,
          and which Toshiba deems reasonably necessary for the joint development
          activities contemplated hereunder.

II.3      Upon receipt of the above design rules and technical information from
          Toshiba, NeoMagic or its Associated Companies shall develop Cell Set
          Libraries (except those already developed by Toshiba, if any).

II.4      Toshiba shall develop DRAM Module of the Products in accordance with
          the target specifications of the DRAM Module as set forth in Exhibit
          II attached hereto, and shall deliver to NeoMagic the design
          information of the so-developed DRAM Module.

II.5      Upon receipt of the design information of DRAM Module from Toshiba,
          NeoMagic or its Associated Companies shall develop the Logic Portion
          using the Cell Set Libraries developed under Article 2.3 above, in an
          appropriate manner so that DRAM Module developed by Toshiba pursuant
          to Article 2.4 above can be merged into the developed Logic Portion to
          constitute a whole Product, and shall provide Toshiba with mask
          database, and specification and any design information, as set forth
          in Exhibit III attached hereto, of the so-developed Logic Portion.

II.6      Upon receipt of the mask database and other necessary information from
          NeoMagic or its Associated Companies, Toshiba shall merge its
          developed DRAM Module into such database, and eventually create final
          mask database of Products. Toshiba will also manufacture, test and
          supply to NeoMagic prototype wafers of Products. NeoMagic shall bear
          only the cost of production for sorted and memory-repaired wafers
          received by NeoMagic from Toshiba and the cost of the final mask
          production.

II.7      From time to time as appropriate in the course of the development
          activities hereunder, each party shall provide the other party with
          additional technical information to the extent it deems reasonably
          necessary for such other party to conduct the activities contemplated
          hereunder.

II.8      Unless otherwise specified herein, each party shall bear any and all
          of its own costs and expenses incurred in connection with the
          development activities contemplated hereunder.




                                   PART III
                              SUPPLY OF PRODUCTS

III.1     Toshiba will warrant that it has made best efforts to ascertain that
          the prototype wafers of products to be supplied under Article 2.6
          conforms to mask database and other design information provided by
          NeoMagic or its Associated Companies. Toshiba's obligation in case
          said warranty is not fulfilled shall only to make reasonable efforts
          to deliver conforming prototype wafers to NeoMagic or, at Toshiba's
          sole discretion, to refund to NeoMagic the applicable costs paid to
          Toshiba by NeoMagic under Article 2.6 with respect to said prototype
          wafers. THE WARRANTY SET FORTH HEREIN IS INCLUSIVE, AND TOSHIBA HEREBY
          DISCLAIMS ALL OTHER WARRANTIES IN RELATION TO THIS AGREEMENT, WHETHER
          EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF
          RELIABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR
          NON-INFRINGEMENT, OR WARRANTIES ARISING FROM A COURSE OF DEALING,
          USAGE, OR TRADE PRACTICE REGARDING PROTOTYPE WAFERS OF PRODUCTS.

III.2     Toshiba will supply to NeoMagic wafers in commercial production to be
          used for the manufacture of Products by NeoMagic under a separate
          wafer supply agreement to be executed between Toshiba and NeoMagic,
          and the terms and conditions to be applied and govern such
          transactions shall be set forth therein in detail.

III.3     NeoMagic shall purchase wafers for the Products only from Toshiba
          (including its subsidiaries), and Toshiba (including its subsidiaries)
          shall supply such wafers as finished Products only to NeoMagic or at
          the order of NeoMagic. NeoMagic and its Associated Companies otherwise
          have the exclusive right (even with respect to the Toshiba and its
          subsidiaries) to sell and control the sale of Products.

                                    PART IV
                         INTELLECTUAL PROPERTY RIGHTS

IV.1      Technical Information. All intellectual property and related rights in
          ---------------------
          and to technical information of either party (including the Associated
          Companies) which is provided to the other party in the course of the
          development of the Product(s) or its portion hereunder shall continue
          to belong to such providing party. Especially, all intellectual
          property and related rights in and to Toshiba's design rules and
          process information shall continue to belong to Toshiba.

IV.2      Intellectual Property. All patents and other intellectual property and
          ---------------------
          related rights in and to all inventions made and technical information
          developed solely by NeoMagic or its Associated Companies in the course
          of the development efforts hereunder ("NeoMagic's Inventions") shall
          belong exclusively to NeoMagic or its Associated Companies. All patent
          and other intellectual property and related rights in and to all
          inventions made and technical information 

                                      -3-


 
          developed solely by Toshiba in the course of the development efforts
          hereunder ("Toshiba's Inventions") shall belong exclusively to
          Toshiba. All patents and other intellectual property and related
          rights in and to all inventions made and technical information
          developed jointly by NeoMagic or its Associated Companies and Toshiba
          shall be jointly owned by NeoMagic or the pertinent Associated Company
          and Toshiba. Subject to the provisions of Section 3.3, each party
          (including the Associated Company if the Associated Company is a joint
          owner) has the right to grant licenses to any third party without
          accounting to the other party (including the Associated Company if the
          Associated Company is a joint owner).

IV.3      Product Rights. Title to and interest in mask work rights shall be
          --------------
          owned by NeoMagic for the Logic Portion of the Products. Title to and
          interest in mask work rights shall be owned by Toshiba for the DRAM
          Module in the Products. Subject to Toshiba's mask work rights set
          forth above, NeoMagic shall retain ownership of the masks and
          Products. This Agreement shall not be construed as granting or
          conferring any intellectual property rights of Toshiba or NeoMagic
          specified in Part IV of this Agreement or with respect to the Products
          except as specified herein.

                                    PART V
                              USE OF TECHNOLOGIES

V.1       NeoMagic and its Associated Companies hereby grants to Toshiba a right
          to use any technical information disclosed to Toshiba hereunder,
          NeoMagic's or its Associated Companies' Inventions and any and all of
          its intellectual property rights with respect thereto, solely (i) to
          design, and develop or have developed by its subsidiaries Products as
          stipulated under Part II; and (ii) to manufacture or have manufactured
          by its subsidiaries, and sell to NeoMagic Products.

V.2       Toshiba hereby grants to NeoMagic and its Associated Companies a right
          to use any technical information disclosed to NeoMagic or its
          Associated Companies hereunder, Toshiba's Inventions and any and all
          of its intellectual property rights with respect thereto, to design
          and develop Products as stipulated under Part II.

                                    PART VI
                              GENERAL PROVISIONS

VI.1      Confidentiality
          ---------------

          (a)         Confidential Information. "Confidential Information" means
                      ------------------------
               any confidential technical data, trade secret, know-how or other
               confidential information disclosed by any party (including the
               Associated Companies) hereunder in writing, orally, or by drawing
               or other form and which shall be marked by the disclosing party
               as "Confidential" or

                                      -4-


                      "Proprietary". If such information is disclosed orally, or
               through demonstration, in order to be deemed Confidential
               Information, it must be specifically designated as being of a
               confidential nature at the time of disclosure and reduced in
               writing and delivered to the receiving party within ten (10) days
               of such disclosure.

          (b)         Exclusions.  Notwithstanding the foregoing, Confidential
                      ----------
               Information shall not include information which:

               (i)                 is known to the receiving party at the time
                      of disclosure or becomes known to the receiving party
                      without breach of this Agreement;

               (ii)                is or become publicly known through no
                      wrongful act of the receiving party or any subsidiary of
                      the receiving party;

               (iii)               is rightfully received from a third party
                      (excluding the Associated Companies) without restriction
                      on disclosure;

               (iv)                is independently developed by the receiving
                      party or any of its subsidiary;

               (v)                 is furnished to any third party (excluding
                      the Associated Companies) by the disclosing party without
                      restriction on its disclosure;

               (vi)                is approved for release upon a prior written
                      consent of the disclosing party;

               (vii)               is disclosed pursuant to judicial order,
                      requirement of a governmental agency or by operation of
                      law.

          (c)         Nondisclosure.  The receiving party agrees that it will
                      -------------
               not disclose any Confidential Information to any third party
               (except that Toshiba may disclose Confidential Information to its
               subsidiaries for purposes relating to this Agreement provided
               that they shall hold such information in confidence) and will not
               use Confidential Information of the disclosing party for any
               purpose other than for the performance of the rights and
               obligations hereunder during the term of this Agreement and for a
               period of five (5) years thereafter, without the prior written
               consent of the disclosing party. The receiving party further
               agrees that Confidential Information shall remain the sole
               property of the disclosing party and that it will take all
               reasonable precautions to prevent any unauthorized disclosure of
               Confidential Information by its employees. No license shall be
               granted by the disclosing party to the receiving party with
               respect to Confidential Information disclosed hereunder unless
               otherwise expressly provided herein.

          (d)         Return of Confidential Information.  Upon the request of
                      ----------------------------------
               the disclosing party, the receiving party will promptly return
               all Confidential information furnished hereunder and all copies
               thereof.

          (e)         Publicity.  The parties agree that all publicity and
                      ---------
               public announcements concerning the formation and existence of
               this Agreement shall be jointly planned and coordinated by and
               among the parties. Neither party shall disclose any of the
               specific terms of this Agreement to any third party without the
               prior written consent of the other party, which consent shall not
               be withheld unreasonably. NeoMagic will be responsible for all
               communications with NeoMagic's customers concerning the subject

                                      -5-


 
               matter hereof. Notwithstanding the foregoing, any party may
               disclose information concerning this Agreement as required by the
               rules, orders, regulations, subpoenas or directives of a court,
               government or governmental agency, after giving prior notice to
               the other party.

          (f)         Remedy for Breach of Confidentiality.  If a party breaches
                      ------------------------------------
               any of its obligations with respect to confidentiality and
               unauthorized use of Confidential information hereunder, the non-
               breaching party shall be entitled to equitable relief to protect
               its interest therein, including but not limited to injunctive
               relief, as well as money damages notwithstanding anything to the
               contrary contained herein.

VI.2      Term and Termination.
          -------------------- 

          (a)         This Agreement shall become effective on the Effective
               Date and shall remain in force for three (3) years thereafter
               unless it is earlier terminated by either party in accordance
               with the following.

          (b)         Either party may terminate this Agreement with immediate
               effect, at its sole discretion, upon giving written notice to the
               other party, in case:

               (i)            the other party defaults in the performance of any
                      material obligation hereunder, and if any such default is
                      not corrected within ninety (90) days after the defaulting
                      party receives written notice of such default from the 
                      non-defaulting party,

               (ii)           the normal conduct of business of the other party
                      as a commercial enterprise ceases or is substantially
                      altered for any reason, or

               (iii)          the other party files a petition in bankruptcy, or
                      is adjudicated bankrupt, or makes a general assignment for
                      the benefit of creditors, or becomes insolvent, or is
                      otherwise unable to meet its business obligations for a
                      period of three (3) consecutive months.

          (c)         Upon expiration or termination of this Agreement, all
               rights and obligations hereunder shall terminate forthwith except
               the provisions of Parts III, IV, V and VI.

VI.3      Force Majeure.  Either party shall not be liable to the other for
          -------------
          failure to perform any part of this Agreement, except for any due
          payment obligation, when such failure is due to fire, flood, strikes,
          labor troubles or other industrial disturbances, inevitable accidents,
          war (declared or undeclared),embargoes, blockages, legal restrictions,
          governmental regulations or orders, riots, insurrections, or any cause
          beyond the control of such party. However, the party so prevented from
          performance shall use diligent efforts to resume performance. This
          Agreement shall not be regarded as terminated or frustrated as a
          result of such failure of performance that does not exceed six (6)
          months, and the parties shall proceed under this Agreement when the
          causes of such non-performance have ceased or have been eliminated.

                                      -6-


 
VI.4      Assignment.  The parties shall not assign or transfer this Agreement,
          ----------
          in whole or in part, or any right or obligation hereunder to any third
          party without the prior written consent of the other party.
          Notwithstanding the foregoing, in no event shall an initial public
          offering of NeoMagic, or any Associated Company, pursuant to the
          United States Securities Act of 1933 be considered an assignment of
          this Agreement or otherwise result in the termination of this
          Agreement. Subject to the foregoing, this Agreement and the parties'
          rights and obligations hereunder shall be binding upon and inure to
          the benefit of the parties hereto and their respective successors and
          assigns.

VI.5      Governing Law.  This Agreement will be interpreted and enforced in
          -------------                                                     
          accordance with the laws of Japan without reference to conflicts of
          law principles.

VI.6      Arbitration.  Each party will make reasonable best efforts to resolve
          -----------                                                          
          amicably any disputes or claims under this Agreement among the
          parties. In the event that a resolution is not reached among the
          parties within thirty (30) days after written notice by any party of
          the dispute or claims, the dispute or claim shall be finally settled,
          (i) if brought by Toshiba, by binding arbitration in San Jose,
          California, and (ii) if brought by NeoMagic, by binding arbitration in
          Tokyo, Japan. Such arbitration shall be conducted under the Rules or
          Conciliation and Arbitration and auspices of the International Chamber
          of Commerce Court of Arbitration by three (3) arbitrators appointed in
          accordance with such rules. The award of arbitration shall be final
          and binding upon both parties, and judgment on the award rendered by
          the arbitrators may be entered in any court having jurisdiction
          thereof. Any monetary award shall be payable in United States dollars.

VI.7      Export Controls.  Toshiba and NeoMagic acknowledge that they are each
          ---------------                                                      
          subject to regulation by agencies of the U.S. and Japanese
          Governments, including the U.S. Department of Commerce which prohibit
          export or diversion of certain products and technology to certain
          countries. Any and all obligations of the parties to provide technical
          information, technical assistance, any media in which any of the
          foregoing is contained, training and related technical data
          (collectively, "Data") shall be subject in all respects to such United
          States and Japanese laws and regulations as from time to time govern
          the license and delivery of technology and products abroad by persons
          subject to the jurisdiction of the United States, including the Export
          Administration Act of 1979, as amended, any successor legislation, and
          the Export Administration Regulations issued by the Department of
          Commerce, International Trade Administration, Bureau of Export
          Administration. Neither party shall export or re-export, directly or
          indirectly, any technical information, including software, furnished
          hereunder or any direct products thereof, to any destination of the
          U.S.A. and/or Japan, including the U.S. Export Administration
          Regulations, without prior written authorization from the appropriate
          governmental authorities.

VI.8      Notice.  Any notice required or permitted to be given under this
          ------
          Agreement shall be delivered (i) by hand, (ii) by registered or
          certified mail, postage prepaid, return receipt requested, to the
          following addresses of the other party, or to such other addresses as
          a party may designate by written notice in accordance with this
          Section 6.9 by overnight courier, or (iii) by electronic 

                                      -7-


 
          transmission with confirming letter mailed under the conditions
          described in (ii). Notice so given shall be deemed effective when
          received or if not received by reason or fault of addressee, when
          delivered.

          If to Toshiba, to:

     Toshiaki Ogi
     General Manager
     International Operations
     Electronic Components                  
     Toshiba Corporation                   
     1-1, Shibaura 1-chome                 
     Minato-ku, Tokyo 105-01               
     Japan                                 
                                           
          If to NeoMagic, to:                    
                                           
     Prakash Agarwal                       
     NeoMagic Corporation                  
     c/o Caledonian Bank & Trust Ltd.      
     Ground Floor                          
     Caledonian House                      
     Mary Street                           
     P.O. Box 1043                         
     Georgetown, Grand Cayman, B.W.I.      
                                           
          with a copy to:                        
                                           
          Wilson Sonsini Goodrich & Rosati       
          650 Page Mill Road                     
          Palo Alto, California 94304-1050       
          Attn: Michael J. Danaher                

VI.9      Relationship of Parties.  The relationship between NeoMagic and
          -----------------------
          Toshiba under this Agreement is that of independent contractors and
          neither shall be, nor represent itself to be, the joint venture,
          franchiser, franchisee, partner, broker, employee, servant, agent, or
          representative of the other for any purpose whatsoever. No party is
          granted any right or authority to assume or create any obligation or
          responsibility, express or implied, on behalf of, or in the name of,
          another party or to bind another in any matter or thing whatsoever.

VI.10     Waiver.  Should any of the parties fail to exercise or enforce any
          ------                                                            
          provision of this Agreement or to waive any rights in respect thereto,
          such waiver or failure shall not be construed as constituting a
          continuing waiver or a waiver of any other right.

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VI.11     Severability.  In the event that any provision or provisions of this
          ------------                                                        
          Agreement shall be held to be unenforceable, the parties shall
          renegotiate those provisions in good faith to be valid, enforceable
          substitute provisions which provisions shall reflect as closely as
          possible the intent of the original provisions of this Agreement. If
          the parties fail to negotiate a substitute provision, this Agreement
          will continue in full force and effect without said provision and will
          be interpreted to reflect the original intent of the parties.

VI.12     Entire Agreement.  This Agreement, including the Exhibits referred to
          ----------------                                                     
          herein and attached hereto sets forth the entire understanding of the
          parties, and supersedes any prior agreement between or among the
          parties with respect to the subject matter hereof. In case of any
          conflicts between this Agreement and any purchase orders, acceptances,
          correspondence, memorandum, listing sheets or other documents forming
          part of any order for Products, this Agreement shall govern. This
          Agreement shall not be amended or modified except by written
          instrument signed by the duly authorized representatives of the
          parties hereto.

                                      -9-


 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives or officers, effective as of the
Effective Date.

Toshiba Corporation                                     NeoMagic Corporation  
                                                                              
By: /s/ TOSHIAKI OGI                                    By: /s/ PRAKASH AGARWAL
    ----------------                                        -------------------
                                                                              
Name:  Toshiaki Ogi                                     Name:  Prakash Agarwal
       ------------                                            ---------------
                                                                              
     General Manager International                      CEO President         
     Operations, Electrical Components Toshiba     
                                                                              
Title:                                                  Title:                
                                                                              
Date:                                                   Date:                  

Exhibits.
- -------- 

I.   Toshiba's Technical Information
II.  DRAM Module Specification
III. Logic Portion Specification

                                      -10-


 
                                   EXHIBIT I
                                   ---------

                        Toshiba's Technical Information
                        -------------------------------

Design Rule

SPICE Parameters

DRAM Core Size

Pin Configuration for DRAM Portion

Test Items for DRAM Portion


                                      -11-


 
                                  EXHIBIT II
                                  ----------




                           DRAM Module Specification



                                      [*]




















                     [*] Confidential Treatment Requested




                                  EXHIBIT III
                                  -----------

                          Logic Portion Specification
                          ---------------------------

The "Logic Portion" is the logic circuitry necessary to realize the graphics
controller function and the input-output circuits (and associated circuits
thereof) of the Product(s) developed by NeoMagic or its Associated Companies
hereunder. The "Logic Portion" includes analog components developed by NeoMagic
or its Associated Companies hereunder.