Exhibit 10.1
SETTLEMENT AGREEMENT AND RELEASES
THIS SETTLEMENT AGREEMENT AND
RELEASES (this “ Agreement ”), dated as
of July 11, 2008, is made by and among Transmeta Corporation,
a Delaware corporation (the “ Company ”),
and the other persons and entities that are signatories hereto
(collectively, the “ Riley Group ,” and
each, individually, a “ member ” of the
Riley Group) which presently are or may be deemed to be members of
a “group” with respect to the common stock of the
Company, $0.00001 par value per share (the “ Common
Stock ”), pursuant to Rule 13d-5 promulgated by
the Securities and Exchange Commission (the “
SEC ”) under the Securities Exchange Act of
1934, as amended (the “ Exchange Act ”).
The Company and the Riley Group are each sometimes referred to
herein as a “ Party .”
RECITALS
WHEREAS , the Riley Group is
the beneficial owner of 1,357,364 shares of Common Stock and in
addition possesses shared voting and dispositive power over 117,634
shares of Common Stock, over which beneficial ownership is
disclaimed;
WHEREAS , on January 31,
2008, Riley Investment Partners Master Fund L.P. and Riley
Investment Management LLC (collectively, the “
Plaintiffs ”) filed a derivative stockholder
action against the directors and certain officers of the Company in
the Superior Court of California, in and for the County of Santa
Clara (“the Court ”), in the action
captioned Riley Investment Partners Master Fund, L.P., et al. v.
Horsley, et al. (Transmeta Corp.), Case No. 1:08-CV-104667
(referred to as the “ Litigation
”);
WHEREAS , on May 15,
2008, the Riley Investment Partners Master Fund L.P. delivered to
the Company a letter (the “ Nomination Letter
”) regarding the nomination of directors for election to the
Company’s board of directors (the “ Board
”) at the 2008 annual meeting of stockholders of the Company
(the “ 2008 Annual Meeting ”) and
concurrently filed a Schedule 14A with the SEC announcing its
intent to solicit proxies for the election of its own opposition
slate of nominees (the “ Proxy Solicitation
”) for election to the Board at the 2008 Annual Meeting;
and
WHEREAS , the Company and the
members of the Riley Group have determined that the interests of
the Company and its stockholders would be best served at this time
by, among other things, avoiding the Proxy Solicitation and further
litigation, and the expense and disruption that may result
therefrom and forever discharging all claims, demands, liabilities,
and causes of action which have or could have been asserted by the
Riley Group, either on their own behalf or on behalf of the
Company, that relate in any way to, arise out of, or could have
arisen out of any statements, representations, omissions, acts,
failures to act, conduct, events or occurrences alleged in the
Litigation.
AGREEMENT
NOW, THEREFORE , in
consideration of the foregoing premises and the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the
receipt
and sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound, hereby, agree as
follows:
1.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . The
Company hereby represents and warrants to the Riley Group
that:
(a) this Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws generally affecting the rights of
creditors and subject to general equity principles;
(b) neither the execution of this Agreement nor the
consummation of any of the transactions contemplated hereby nor the
fulfillment of the terms hereof, in each case in accordance with
the terms hereof, will conflict with, or result in a breach or
violation of, or result in the imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to the terms of, any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to
which the Company or any of its subsidiaries is a party or bound or
to which its or their property is subject;
(c) the execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations
hereunder do not and will not violate the Certificate of
Incorporation, Bylaws or any policy, procedure, charter or code of
the Company, each as amended to date; and
(d) the execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations
hereunder do not and will not violate in any material respect any
law, rule, regulation or order of any court or other agency of
government that is applicable to the Company.
2.
REPRESENTATIONS AND WARRANTIES OF THE RILEY GROUP .
Each member of the Riley Group represents and warrants to the
Company that:
(a) this Agreement has been duly authorized, executed and
delivered by each member of the Riley Group, and is a valid and
binding obligation of each such member, enforceable against each
such member in accordance with its terms, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
generally affecting the rights of creditors and subject to general
equity principles;
(b) the execution and delivery by each member of the Riley
Group of this Agreement and the performance by each such member of
its obligations hereunder do not and will not violate, any
governing partnership agreement, membership agreement and/or any
other governing instruments of such member, or any policy,
procedure, charter or code of such member, each as amended to
date;
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(c) the execution and delivery by each member of the Riley
Group of this Agreement and the performance by each such member of
its obligations hereunder do not and will not violate in any
material respect any law, rule, regulation or order of any court or
other agency of government that is applicable to such member;
(d) each of Bryant R. Riley (“
Mr. Riley ”) and J. Michael Gullard
(“ Mr. Gullard ,” and together with
Mr. Riley, the “ Riley Directors ”)
is “independent” as “independence” is
defined by the listing standards of The NASDAQ Stock Market
LLC;
(e) the Riley Group is the beneficial owner of, in the
aggregate, more than five percent (5%) of the outstanding Common
Stock, as of the date hereof, and such ownership is set forth on
Exhibit A hereto; and
(f) no member of the Riley Group has previously assigned or
conveyed to any third person (including by operation of law) any
right, claim or cause of action that is the subject of this
Agreement (including the releases contained in this
Agreement).
3. COVENANTS OF
THE COMPANY .
(a) Subject to, and effective upon, the filing with the
Court a stipulation requesting that the Court enter an order
dismissing the Litigation with prejudice (as set forth in
Section 4(c), below), the authorized size of the Board shall
be increased to nine (9) directors divided evenly into the
three classes of directors, and Mr. Gullard shall be elected
to the Board as a Class I director of the Company.
(b) Upon his election, the Board shall appoint
Mr. Gullard to the Compensation Committee of the Board for the
duration of Mr. Gullard’s service on the Board;
provided Mr. Gullard is then qualified to serve on the
Compensation Committee under applicable legal requirements and
listing standards. If at such time as Mr. Gullard is not so
qualified, he may be removed from the Compensation Committee by the
Board. Based solely upon information provided by, and
representations from, Mr. Gullard, the Company believes that
Mr. Gullard is currently qualified to serve on the
Compensation Committee under applicable legal requirements and
listing standards. The Company has no reasonable basis to presently
believe that Mr. Gullard is not qualified to serve on the
Compensation Committee under applicable legal requirements and
listing standards.
(c) Subject to the Court entering an order dismissing the
Litigation with prejudice (as set forth in Section 4(c),
below), the Company shall include Mr. Riley in the
Board’s slate of nominees for election as a Class II
director of the Company at the 2008 Annual Meeting and use its
reasonable best efforts to cause the election of Mr. Riley at
the 2008 Annual Meeting, including, without limitation,
recommending that the Company’s stockholders vote in favor of
the election of Mr. Riley at the 2008 Annual Meeting and
voting the shares of Common Stock represented by all proxies
granted by stockholders in connection with the solicitation of
proxies by the Board in connection with the 2008 Annual Meeting in
favor of Mr. Riley, except for such proxies that specifically
indicate a vote to withhold authority with respect to
Mr. Riley.
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Neither
the Board nor the Company shall take any position, make any
statements or take any action inconsistent with such
recommendation. Based solely upon information provided by, and
representations from (excluding Section 2(d) hereof),
Mr. Riley, the Company believes that Mr. Riley is currently
“independent” as defined by the listing standards of
The NASDAQ Stock Market LLC.
(d) The Riley Directors, upon election to the Board, will
serve as full members of the Board and be governed by the same
protections and obligations regarding confidentiality, conflicts of
interests, fiduciary duties, trading and disclosure policies and
other governance guidelines as are applicable to all directors of
the Company, and shall have the same rights and benefits as are
applicable to all independent directors of the Company, including
(but not limited to) insurance, indemnification, compensation and
fees.
(e) In the event a Riley Director shall resign prior to the
expiration of the term for which he is elected to serve on the
Board, then the Riley Group shall have the right to nominate for
election by the Board a replacement solely to serve the remainder
of such Riley Director’s term on the Board. The Riley Group
hereby agrees that such nominee shall be “independent”
as “independence” is defined by the listing standards
of The NASDAQ Stock Market LLC. In addition, such nominee shall
provide all information required of shareholder nominees as set
forth in the Company’s proxy statements filed with the SEC
and such further information as reasonably requested by the
Nominating and Corporate Governance Committee to determine the
qualifications and independence of such nominee. The appointment of
such nominee shall be subject to the approval of the Board. All
references in this Agreement to the Riley Directors shall also be
deemed to mean such persons as may be appointed a member of the
Board pursuant to this Section 3(e).
4. COVENANTS OF
THE RILEY GROUP .
(a) Subject to the inclusion of Mr. Riley in the
Board’s slate of nominees for election as a Class II
director of the Company at the 2008 Annual Meeting, the Riley Group
agrees to vote in favor of the Board’s slate of nominees for
election as directors of the Company at the 2008 Annual Meeting and
all future annual meetings of the stockholders of the Company;
provided that the Riley Group is not otherwise specifically
instructed by their client(s) to vote in another manner. The Riley
Group further agrees to vote in favor of the proposals submitted by
the Board at all annual meetings of the stockholders of the Company
after the 2008 Annual Meeting; provided that Mr. Riley
(or his successor nominated pursuant to Section 3(e) hereof) has
voted in favor of such proposal as a member of the Board and the
Riley Group is not otherwise specifically instructed by their
client(s) to vote in another manner. Notwithstanding anything in
this Agreement to the contrary, this Section 4(a) shall
terminate on the first date after the 2008 Annual Meeting that Mr.
Riley (or his successor nominated pursuant to Section 3(e) hereof)
is not or ceases to be a director on the Board.
(b) Immediately prior to the issuance of the press release
contemplated in Section 9 hereof, the Riley Group
shall, subject to Section 22 hereof:
(i) irrevocably withdraw the Nomination Letter and shall take
all action necessary or appropriate to terminate the Proxy
Solicitation and (ii) file a Schedule 13D/A notifying the
SEC of the termination of the Proxy
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Solicitation. The Riley Group shall make all other necessary
filings with the SEC to accomplish such withdrawal and termination
and at its own expense.
(c) Promptly following the execution of this Agreement, and
in any event within five (5) business days thereof, the Plaintiffs
and the parties named in the Litigation as defendants shall file
with the Court a stipulation requesting that the Court enter an
order dismissing the Litigation with prejudice. The stipulation and
proposed order shall specify that each party is to bear his or its
own costs and attorneys fees.
5. STANDSTILL
PERIOD .
(a) Each member of the Riley Group agrees that until the
first day following the earlier of (x) the date of the 2010
annual meeting of stockholders of the Company and
(y) September 30, 2010 (such period, the “
Standstill Period ”), without the prior written
consent of the Board specifically expressed in a written resolution
adopted by a majority vote of the entire Board, neither it nor any
of its Affiliates (as such term is defined below) under its control
or direction will, directly or indirectly, or in conjunction with
any other person or entity:
(i) effect or seek to effect (including, without
limitation, by entering into any discussions, negotiations,
agreements or understandings), offer or propose (whether publicly
or otherwise) to effect, or cause or participate in, or in way
knowingly assist or facilitate any other person to effect or seek,
offer or propose to effect any (x) tender offer or exchange
offer, merger, acquisition or other business combination involving
the Company or any of its subsidiaries; (y) any form of
business combination or acquisition or other transaction relating
to a material amount of assets or securities of the Company or any
of its subsidiaries or (z) any form of restructuring,
recapitalization or similar transaction with respect to the Company
or any of its subsidiaries;
(ii) acquire, offer or propose to acquire any voting
securities (or beneficial ownership thereof), or rights or options
to acquire any voting securities (or beneficial ownership thereof)
of the Company if after any such case, immediately after the taking
of such action the Riley Group, together with its respective
Affiliates, would in the aggregate, beneficially own more than 13%
of the then outstanding Common Stock;
(iii) engage in any solicitation of proxies or
consents to vote any voting securities of the Company in opposition
to the recommendation of the Board with respect to any matter,
including the election of directors;
(iv) knowingly seek to influence any person with
respect to the voting of any securities of the Company in
opposition to the recommendation of the Board with respect to any
matter, including but not limited to the election of members of the
Board, unless requested to do so by the Company;
(v) otherwise act, alone or in concert with others, to
knowingly seek to control or influence the Board or the management
or policies of the Company;
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(vi) otherwise act, alone or in concert with others,
to seek to control the Board or initiate or take any action to
obtain representation on the Board, or seek the removal of any
director from the Board, except as permitted expressly by this
Agreement;
(vii) take any action to seek to amend any provision
of the Company’s Certificate of Incorporation or Bylaws
except as may be approved by the Board;
(viii) grant any proxy rights with
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