TMTA Transmeta (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

TRANSMETA CORPORATION

 

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1)		Title of each class of securities to which transaction applies:
			Common stock, par value $0.00001 per share of Transmeta Corporation
			Series B Preferred Stock, par value $0.00001 per share of Transmeta Corporation
	2)		Aggregate number of securities to which transaction applies:
			12,431,672 shares of Transmeta Corporation common stock (representing the number of shares of Transmeta Corporation common stock outstanding on December 8, 2008 and assuming the conversion of 300,000 shares of Transmeta Corporation preferred stock outstanding on December 8, 2008 into an aggregate of 214,041 shares of Transmeta common stock) and vested options to purchase 414,455 shares of Transmeta Corporation common stock (as of December 8, 2008) with an exercise price of less than $19.00 (the upper end of the estimate range of cash consideration to be received in respect of each share of Transmeta common stock in the transaction).
	3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			The maximum aggregate value was determined based upon the sum of (A) 12,431,672 shares of Transmeta Corporation common stock multiplied by $19.00 per share; and (B) vested options to purchase 414,455 shares of Transmeta Corporation common stock with an exercise price of less than $19.00 multiplied by $5.59 (which is the difference between $19.00 and the $13.41 weighted average exercise price of all such options to purchase shares of Transmeta Corporation common stock).
			In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was calculated by multiplying 0.0000393 by the aggregate value calculated in the preceding sentence.
	4)		Proposed maximum aggregate value of transaction:
			$238,518,571.45
	5)		Total fee paid:
			$9,373.78

o		Fee paid previously with preliminary materials.
o  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1)		Amount Previously Paid:
	2)		Form, Schedule or Registration Statement No.:
	3)		Filing Party:
	4)		Date Filed:

 

TRANSMETA CORPORATION

2540 Mission College Boulevard

Santa Clara, California 95054

 

[          ], 2008

 

To our stockholders:

 

On November 17, 2008, we entered into an Agreement and Plan of Merger with Novafora, Inc. (“Novafora”) and Transformer Acquisition LLC, a wholly owned subsidiary of Novafora, under which Transmeta will be merged with and into Transformer Acquisition LLC, which will be the surviving entity in the merger.

 

If the merger is consummated, (i) each share of Transmeta preferred stock outstanding as of immediately prior to the effective time of the merger will receive $7.50 in cash, without interest, unless such shares are converted to shares of common stock prior to the effective time, in which case such shares will receive the common share consideration described below; (ii) each share of Transmeta common stock outstanding as of immediately prior to the effective time of the merger will receive an amount in cash, without interest, equal to the quotient obtained by dividing (1) the aggregate common stock merger consideration (determined in the manner provided below) by (2) the number of shares of our common stock outstanding as of the effective time of the merger, assuming the exercise of all vested in-the-money options (as defined below); (iii) each option to purchase shares of Transmeta common stock outstanding as of immediately prior to the effective time of the merger with a per share exercise price less than the per share cash merger consideration to be received by holders of our common stock in the merger, to the extent vested and exercisable as of the effective time of the merger (“vested in-the-money options”), will, automatically and without any required action on the part of the holder thereof, receive a cash payment equal to the product obtained by multiplying (1) the difference between the per share cash merger consideration to be received by holders of our common stock in the merger, as described above, and the per share exercise price of such vested in-the-money option, by (2) the number of vested shares of Transmeta common stock underlying such vested in-the-money option; and (iv) each unvested option to purchase shares of Transmeta common stock outstanding as of immediately prior to the effective time of the merger and each option to purchase shares of Transmeta common stock outstanding as of immediately prior to the effective time of the merger with a per share exercise price greater than or equal to the per share cash merger consideration to be received by holders of our common stock in the merger, whether vested or unvested, will be automatically cancelled without any consideration.

 

The aggregate common stock merger consideration equals $255.6 million plus the aggregate exercise price of the vested in-the-money options less the sum of (i) the aggregate cash merger consideration payable with respect to shares of our preferred stock outstanding immediately prior to the effective time of the merger and (ii) the maximum aggregate cash consideration payable with respect to warrants to purchase Transmeta common stock outstanding as of the effective time of the merger, determined pursuant to the terms of such warrants.

 

The aggregate common stock merger consideration is subject to upward adjustment by the sum of, in each case determined as of the effective time of the merger:

 

 

In addition, the aggregate common stock merger consideration is subject to downward adjustment by the sum of, in each case determined as of the effective time of the merger and, with respect to each of the amounts under the first eight bullets below, only to the extent unpaid as of the effective time of the merger:

 

 

The amount of any adjustments to the aggregate common stock merger consideration will not be known until the closing of the merger and will be dependent to a large extent on the timing of closing. Based in part on our current expectation that the merger will be consummated in the first quarter of 2009, we estimate that stockholders will receive between $18.70 and $19.00 for each outstanding share of Transmeta common stock held by them. We anticipate closing the merger within a few days following the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement by Transmeta stockholders. Assuming the merger is consummated within a few days following the special meeting on [          ], 2009, we estimate that stockholders will receive between $[  .  ] and $[  .  ] for each outstanding share of Transmeta common stock held by them.

 

In connection with the merger agreement with Novafora, we will hold a Special Meeting of Stockholders of Transmeta Corporation at the [Hilton Santa Clara] located at [4949 Great America Parkway, Santa Clara, California], on [          ], 2009 at [8:00] a.m., Pacific Time. At the special meeting, you will be asked to consider and vote upon the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. After careful consideration, the board of directors of Transmeta has unanimously approved and has declared the merger, the merger agreement and the other transactions contemplated by the merger agreement advisable, and has determined that it is in the best interests of Transmeta stockholders that Transmeta enter into the merger agreement and consummate the merger and the other transactions contemplated by the merger agreement on the terms and conditions set forth in the merger agreement. Accordingly, the board of directors of Transmeta unanimously recommends that Transmeta stockholders vote “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. We are also asking you to vote “FOR” any proposal by Transmeta’s board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement.

 

The merger cannot be consummated unless stockholders holding a majority of the outstanding shares of Transmeta common stock and preferred stock, voting together as a single class on an as-converted to common stock basis, at the close of business on the record date for the special meeting vote “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. The consummation of the merger is also subject to the satisfaction or waiver of other specified closing conditions. More information about the merger agreement and the merger is contained in the accompanying proxy statement. We

encourage you to read the accompanying proxy statement carefully and in its entirety, because it explains the proposed merger, the documents related to the merger and other related matters.

 

Please use this opportunity to take part in Transmeta’s affairs by voting on the business to come before the special meeting. Your vote is very important, regardless of the number of shares you hold. Whether or not you plan to attend the special meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. If your shares are held in an account at a brokerage firm, bank or other nominee, you should instruct your broker, bank or nominee how to vote in accordance with the voting instructions furnished by your broker, bank or nominee. If you sign, date and send us your proxy card, but do not indicate how you want to vote, your proxy will be voted “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. If you do not vote or do not instruct your broker, bank or nominee how to vote, it will have the same effect as voting against the proposal to adopt the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. Returning the proxy does not deprive you of your right to attend the special meeting and to vote your shares in person.

 

We believe that this merger is in the best interests of the stockholders and accordingly I along with the other members of the board of directors of Transmeta recommend that you vote “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. After you have reviewed the enclosed materials, please vote by one of the means specified in the proxy statement as soon as you can. Thank you in advance for your continued support.

 

We hope to see you at the special meeting.

 

Sincerely,

 

 

Lester M. Crudele
President and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, passed upon the merits or fairness of the merger or determined if this proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

 

This Proxy Statement is dated [          ], 2008, and will first be mailed to the stockholders of Transmeta Corporation on or about [          ], 2008.

TRANSMETA CORPORATION
2540 Mission College Boulevard
Santa Clara, California 95054

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

To our stockholders:

 

Notice is hereby given that a Special Meeting of Stockholders of Transmeta Corporation (“Transmeta”) will be held at the [Hilton Santa Clara] located at [4949 Great America Parkway, Santa Clara, California], on [          ], 2009 at [8:00] a.m., Pacific Time.

 

At the special meeting, you will be asked to consider and vote upon the following matters:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 17, 2008, by and among Novafora, Inc. (“Novafora”), Transformer Acquisition LLC and Transmeta (the “merger agreement”) and the approval of the merger and other transactions contemplated by the merger agreement; and

 

2. To consider and vote upon any proposal by Transmeta’s board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement.

 

The board of directors of Transmeta has unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and recommends that Transmeta stockholders vote “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. The board of directors of Transmeta also recommends that Transmeta stockholders vote “FOR” any proposal by Transmeta’s board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement.

 

The board of directors of Transmeta has fixed the close of business on [          ], 2008 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. Only holders of record of shares of Transmeta common stock and preferred stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date, Transmeta had outstanding and entitled to vote [          ] shares of common stock and 300,000 shares of preferred stock. Transmeta stockholders who do not wish to accept the merger consideration for their shares and who do not vote in favor of the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement may have appraisal rights under the Delaware General Corporation Law in connection with the merger if they meet specified conditions. See the section of this proxy statement entitled “The Merger — Appraisal Rights” beginning on page 64.

 

Your vote is very important, regardless of the number of shares you hold.   The affirmative vote of the holders of a majority of the outstanding shares of Transmeta common stock and preferred stock, voting together as a single class on an as-converted to common stock basis, at the close of business on the record date is required to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. The affirmative vote of the holders of a majority of the shares of Transmeta common stock and preferred stock, voting together as a single class on an as-converted to common stock basis, present in person or represented by proxy at the special meeting and entitled to vote is required to approve any proposal by Transmeta’s board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy card or submit your vote by telephone or on the Internet through your broker, bank or nominee to

ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the adoption of the merger agreement and “FOR” any proposal by Transmeta’s board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. If you do not vote, it will have the same effect as a vote against the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement and will make it more difficult for Transmeta to achieve a quorum at the special meeting. If you do not vote, it will not affect the outcome of any proposal to adjourn the special meeting, but will reduce the number of votes required to approve such a proposal. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

This proxy statement contains detailed information about the merger agreement, the merger and the other transactions contemplated by the merger agreement. Please read this proxy statement and the merger agreement attached to it as Appendix A carefully and in their entirety. For specific instructions on how to vote your shares, please refer to the section of this proxy statement entitled “The Special Meeting” beginning on page 19.

 

By Order of our Board of Directors

 

John O’Hara Horsley

Secretary

 

Santa Clara, California

[          ], 2008

 

 

 

 

TABLE OF CONTENTS

 

 

 

The following are some questions that you, as a stockholder of Transmeta, may have regarding the merger and the special meeting of Transmeta stockholders, and brief answers to such questions. We urge you to read carefully this entire proxy statement, because the information in this section does not provide all the information that may be important to you with respect to the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement. Additional important information is also contained in the appendices to this proxy statement and the documents referred to in this proxy statement.

 

 

 

 

 

The aggregate common stock merger consideration is subject to upward adjustment by the sum of, in each case determined as of the effective time of the merger:

 

 

In addition, the aggregate common stock merger consideration is subject to downward adjustment by the sum of, in each case determined as of the effective time of the merger and, with respect to each of the amounts under the first eight bullets below, only to the extent unpaid as of the effective time of the merger:

 

 

 

 

 

 

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, passed upon the merits or fairness of the merger or determined if this proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

 

This summary highlights selected information from this proxy statement relating to the merger. This summary may not contain all of the information that is important to you. To understand the merger fully and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement and the documents to which we have referred you. In particular, you should read the Appendices attached to this proxy statement, including the Agreement and Plan of Merger, dated as of November 17, 2008, by and among Novafora, Transmeta and Transformer Acquisition LLC, which is attached as Appendix A to this proxy statement. We have included page references in parentheses to direct you to a more complete description of the topics presented in this summary. See the section entitled “Where You Can Find More Information” beginning on page 87.

 

Transmeta Corporation

2540 Mission College Boulevard

Santa Clara, California 95054

Telephone: 408-919-3000

 

Transmeta Corporation, or Transmeta, develops and licenses innovative computing, microprocessor and semiconductor technologies and related intellectual property. Founded in 1995, we first became known for designing, developing and selling our highly efficient x86-compatible software-based microprocessors, which deliver a balance of low power consumption, high performance, low cost and small size suited for diverse computing platforms. We are presently focused on developing and licensing its advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices, and in licensing our computing and microprocessor technologies to other companies.

 

We were incorporated in California in March 1995 and reincorporated in Delaware in October 2000. We are listed on the Nasdaq Global Market under the symbol “TMTA.” Our principal executive offices are located at 2540 Mission College Boulevard, Santa Clara, California 95054, and our telephone number is (408) 919-3000. Additional information regarding us is available on our website www.transmeta.com and contained in our filings with the Securities and Exchange Commission (the “SEC”). See “Where You Can Find More Information” beginning on page 87.

 

Novafora, Inc.

2460 North First Street

Suite 200

San Jose, CA 95131 USA

Telephone: 408-582-5300

 

Novafora, Inc., or Novafora, is a developer of digital video processors. Novafora’s principal executive offices are located at 2460 North First Street, Suite 200, San Jose, CA 95131 and its telephone number is (408) 582-6300. Novafora was incorporated in Delaware in November 2004. Additional information regarding Novafora is available on Novafora’s website www.novafora.com or by calling 408-582-5300.

 

Transformer Acquisition LLC

2460 North First Street

Suite 200

San Jose, CA 95131 USA

Telephone: 408-582-5300

 

Transformer Acquisition LLC, or merger sub, is a Delaware limited liability company and a wholly owned subsidiary of Novafora. Merger sub was formed in November 2008 and exists solely to facilitate the merger and has not engaged in any operations other than in connection with its formation and the negotiation and execution of the merger agreement. Merger sub’s principal executive offices and telephone number are the same as those of Novafora.

 

Novafora has agreed to acquire Transmeta under the terms of the merger agreement that is described in this proxy statement and attached as Appendix A . We encourage you to read the merger agreement carefully and in its entirety. It is the principal document governing the merger.

 

Under the merger agreement, Transmeta will be merged with and into merger sub, which will be the surviving entity in the merger. Our stockholders will receive cash in the merger in exchange for shares of Transmeta common stock and preferred stock held by them.

 

If the merger is consummated, (i) holders of our preferred stock will receive $7.50 in cash, without interest, in exchange for each share of our preferred stock held immediately prior to the effective time of the merger, unless such shares are converted to shares of common stock prior to the effective time, in which case such shares will receive the common share consideration described below, and (ii) holders of our common stock will receive an amount in cash, without interest, in exchange for each share of our common stock held immediately prior to the effective time of the merger, equal to the quotient obtained by dividing (1) the aggregate common stock merger consideration (determined in the manner provided below) by (2) the number of shares of our common stock outstanding as of the effective time of the merger, assuming the exercise of all vested in-the-money options.

 

The aggregate common stock merger consideration equals $255.6 million plus the aggregate exercise price of the vested in-the-money options less the sum of (i) the aggregate cash merger consideration payable with respect to shares of our preferred stock outstanding immediately prior to the effective time of the merger and (ii) the maximum aggregate cash consideration payable with respect to warrants to purchase Transmeta common stock outstanding as of the effective time of the merger, determined pursuant to the terms of such warrants.

 

The aggregate common stock merger consideration is subject to upward adjustment by the sum of, in each case determined as of the effective time of the merger:

 

 

In addition, the aggregate common stock merger consideration is subject to downward adjustment by the sum of, in each case determined as of the effective time of the merger and, with respect to each of the amounts under the first eight bullets below, only to the extent unpaid as of the effective time of the merger:

 

 

 

The amount of any adjustments to the aggregate common stock merger consideration will not be known until the closing of the merger and will be dependent to a large extent on the timing of closing. Based in part on our current expectation that the merger will be consummated in the first quarter of 2009, we estimate that stockholders will receive between $18.70 and $19.00 for each outstanding share of Transmeta common stock held by them. If Transmeta stockholders approve the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement at the special meeting, we anticipate consummating the merger within a few days following the special meeting. Assuming the merger is consummated within a few days following the special meeting on [          ], 2009, we estimate that stockholders will receive between $[  .  ] and $[  .  ] for each outstanding share of Transmeta common stock held by them.

 

See the section entitled “The Merger — Merger Consideration” beginning on page 24.

 

Options (Page 25)

 

If the merger is consummated, (i) each outstanding option to purchase shares of Transmeta common stock with a per share exercise price less than the per share cash merger consideration to be received by holders of our common stock in the merger, to the extent vested and exercisable as of the effective time of the merger (the “vested in-the-money options”), will be converted into the right to receive an amount in cash equal to the product obtained by multiplying (1) the difference between the per share cash merger consideration to be received by holders of our common stock in the merger, as described above, and the per share exercise price of such vested in-the-money option, by (2) the number of vested shares of Transmeta common stock underlying such vested in-the-money option, and (ii) each unvested option to purchase shares of Transmeta common stock and each outstanding option to purchase shares of Transmeta common stock with a per share exercise price greater than or equal to the per share cash merger consideration to be received by holders of our common stock in the merger, whether vested or unvested, will be automatically cancelled without any consideration payable in respect thereof. See the section entitled “The Merger — Effect on Outstanding Transmeta Options and Warrants — Options” beginning on page 25.

 

Warrants (Page 25)

 

If the merger is consummated, holders of outstanding warrants to purchase Transmeta common stock will continue to remain outstanding, with such adjustments as specified by the terms and conditions of the warrants, and Transmeta’s contractual obligations under the warrants will be assumed by Novafora. See the section entitled “The Merger — Effect on Outstanding Transmeta Options and Warrants — Warrants” beginning on page 25.

 

In the course of reaching its decision to approve the merger and enter into the merger agreement, our board of directors consulted with our senior management, outside legal counsel and our financial advisor, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors:

 

 

 

See the section entitled “The Merger — Recommendation of our Board of Directors” beginning on page 45 for additional factors that our board of directors considered.

 

After careful consideration of the factors described in the section entitled “The Merger — Recommendation of our Board of Directors” beginning on page 45, our board of directors unanimously:

 

 

Our board of directors also recommends that our stockholders vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement

 

See the section entitled “The Merger — Recommendation of our Board of Directors” beginning on page 45).

 

Time, Date and Place.   A special meeting of our stockholders will be held at the [Hilton Santa Clara] located at [4949 Great America Parkway, Santa Clara, California], on [          ], 2009 at [8:00] a.m., Pacific Time, to consider and vote upon a proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement and consider and vote upon a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.

 

Record Date and Voting Power.   You are entitled to vote at the special meeting if you owned shares of our common stock and/or preferred stock at the close of business on [          ], 2008, the record date set by our board of directors for the special meeting. Each holder of record of Transmeta common stock as of the close of business on the record date will be entitled to one vote for each share of common stock held on that date. Each holder of record of Transmeta preferred stock as of the close of business on the record date will be entitled to 0.71347 votes (that number being equal to the number of shares of common stock into which one share of preferred stock could have been converted on the record date) for each share of preferred stock held on that date. As of the record date, there were [          ] shares of our common stock and 300,000 shares of our preferred stock outstanding and entitled to be voted at the special meeting.

Required Vote.   The adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement requires the affirmative vote of at least a majority of the shares of our common stock and preferred stock, voting together on an as-converted to common stock basis, outstanding at the close of business on the record date. The affirmative vote of the holders of a majority of the shares of our common stock and preferred stock, voting together on an as-converted to common stock basis, present in person or represented by proxy at the special meeting and entitled to vote is required to approve any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. In connection with the merger agreement, all of our directors and executive officers have entered into voting agreements with Novafora pursuant to which each of them have agreed, in their capacities as stockholders, to, among other things, vote the shares of our common stock over which that stockholder exercises voting control in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. These stockholders exercise voting control over an aggregate of [          ] shares of our common stock as of [          ], 2008, the record date for the special meeting, which constitute approximately [     ]% of the shares of our common stock outstanding on that date. See the section entitled “The Merger — Voting Agreements” beginning on page 57.

 

Share Ownership of Directors and Management.   As of the record date, our directors and executive officers and their affiliates owned approximately [     ]% of the shares entitled to vote at the special meeting.

 

See the section entitled “The Special Meeting” beginning on page 19.

 

Piper Jaffray & Co. (“Piper Jaffray”) has delivered to our board of directors its opinion, as of November 17, 2008, to the effect that as of that date and based upon and subject to the matters stated in its opinion, the cash merger consideration expected to be received by holders of our common stock in the merger is fair, from a financial point of view, to the holders of Transmeta common stock (other than Novafora and its affiliates). See the section entitled “The Merger — Opinion of Piper Jaffray & Co. beginning on page 48.

 

The full text of the written opinion of Piper Jaffray, dated November 17, 2008, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached hereto as Appendix D . You are urged to, and should, carefully read the Piper Jaffray opinion in its entirety. The Piper Jaffray opinion was directed to our board of directors and was not intended to be, and does not constitute, a recommendation as to how any of our stockholders should vote with respect to the merger, the merger agreement or any other matter.

 

Piper Jaffray acted as our financial advisor in connection with the merger and will receive an estimated fee of approximately $2.1 million from us, approximately $1.3 million of which is contingent upon the consummation of the merger. Piper Jaffray received a non-refundable retainer in the amount of $300,000 and a fee of $500,000 from us for providing its opinion, both of which will be credited against the fee for financial advisory services. The opinion fee was not contingent upon the consummation of the merger or the conclusions reached in Piper Jaffray’s opinion.

 

The consummation of the merger is not subject to a financing contingency, and Novafora has represented and warranted in the merger agreement that it will have sufficient funds, together with the amount of Transmeta’s unrestricted cash, cash equivalents and short-term investments as of the effective time of the merger, to consummate the transactions contemplated by the merger agreement, including payment in full of the amounts payable to our stockholders in the merger.

 

$11.6 million of the aggregate amount payable to Transmeta stockholders in the merger is held in an escrow account and is to be released upon the closing of the merger, all pursuant to the terms and conditions of the Escrow

Agreement, dated as of November 14, 2008 (the “escrow agreement”), by and among Transmeta, Novafora, Silicon Valley Bank and Intellectual Venture Funding LLC, an affiliate of Intellectual Ventures, a privately-held, invention investment company. See the section entitled “The Merger — Escrow Agreement” beginning on page 57.

 

When considering our board of directors’ recommendation that Transmeta stockholders vote in favor of the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, Transmeta’s stockholders should be aware that our directors and executive officers may have interests in the merger that differ from, or which are in addition to, the interests of Transmeta stockholders. These interests create a potential conflict of interest and may be perceived to have affected their decision to support or approve the merger. Our board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the merger and in making its decisions in approving the merger agreement, the merger and the related transactions. These interests include continuation of indemnification rights and coverage under existing or new directors’ and officers’ liability insurance policies, accelerated vesting of stock awards to executive officers and certain directors, and the receipt of severance benefits in the event of certain terminations prior to or upon the consummation of the merger. Transmeta stockholders should be aware of these interests when considering our board of directors’ recommendation to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. See the section entitled “The Merger — Interests of our Directors and Executive Officers in the Merger” beginning on page 58.

 

In connection with the merger agreement, all of our directors and executive officers have entered into voting agreements with Novafora pursuant to which each of them have agreed, in their capacities as stockholders, to, among other things, vote the shares of our common stock held by such stockholder in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. These stockholders hold an aggregate of [          ] shares of our common stock as of [          ], 2008, the record date for the special meeting, which constitute approximately [     ]% of the shares of our common stock outstanding on that date. See the section entitled “The Merger — Voting Agreements” beginning on page 57, as well as the forms of voting agreement attached hereto as Appendices B-1 and B-2 .

 

In connection with the execution of the merger agreement, we entered into an amendment of the Rights Agreement, dated as of January 15, 2002, between Transmeta and Mellon Investor Services LLC (the “rights agreement”), for the purpose of making the provisions of the rights agreement inapplicable to the execution of the merger agreement and the voting Agreements; the announcement of the merger agreement, the voting agreements and the merger; and the consummation of the merger. See the section entitled “The Merger — Amendment of Rights Agreement” beginning on page 63.

 

Our common stock is listed on the Nasdaq Global Market under the symbol “TMTA.” On November 17, 2008, the last full trading day prior to the public announcement of the proposed merger, our common stock closed at a price of $17.52. On [          ], 2008, the last full trading day prior to the date of this proxy statement, our common stock closed at a price of $[  .  ]. See the section entitled “The Merger — Market Price and Dividend Data” beginning on page 63.

 

If the merger is consummated, our common stock will no longer be traded on the Nasdaq Global Market and will be deregistered under the Securities Exchange Act of 1934, as amended, and we will no longer be required to file periodic reports with the SEC with respect to our shares of common stock.

 

No Solicitation Covenant (Page 76)

 

We have agreed with Novafora that our directors and executive officers will not, and we will not authorize or direct any of our subsidiaries or any of our or our subsidiaries’ respective employees, directors, officers, agents, investment bankers, attorneys, accountants, advisors and other representatives to, directly or indirectly:

 

 

We have also agreed with Novafora that we and our subsidiaries will immediately cease any and all existing activities, discussions or negotiations with any person conducted prior to or on November 17, 2008 with respect to any acquisition proposal and request the prompt return or destruction of all confidential information of Transmeta previously furnished to such person and which such person is not entitled to retain, and shall not, nor permit any of our subsidiaries to, exercise its discretion to waive any rights under any standstill, confidentiality or similar agreements entered into by such person.

 

See the section entitled “Agreement and Plan of Merger — No Solicitation Covenant; Change in Board Recommendation” beginning on page 76.

 

Conditions to the Consummation of the Merger (Page 79)

 

Conditions to the Obligations of Novafora and Merger Sub.   The obligations of Novafora and merger sub to consummate the merger are subject to the satisfaction or waiver of each of the following conditions:

 

 

 

Conditions to the Obligations of Transmeta.   Our obligations to consummate the merger are subject to the satisfaction or waiver of each of the following conditions:

 

 

See the section entitled “Agreement and Plan of Merger — Conditions to the Consummation of the Merger” beginning on page 79.

Termination of the Merger Agreement (Page 81)

 

Novafora or we can terminate the merger agreement by written notice under specified circumstances, including:

 

 

 

 

 

See the section entitled “Agreement and Plan of Merger — Termination of the Merger Agreement” beginning on page 81.

 

Termination Fee

 

The merger agreement requires that we pay Novafora a termination fee of $5,000,000 if:

 

 

See the section entitled “Agreement and Plan of Merger — Termination Fee” beginning on page 82.

 

We believe that the notification and waiting period requirements of the Hart Scott Rodino Act, or HSR Act, do not apply to the proposed transaction, and that we will not be required to make any filings with the Antitrust Division of the Department of Justice (Antitrust Division) or the Federal Trade Commission (FTC). However, the FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed transaction. At any time before or after the consummation of the transaction, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the transaction or seeking the divestiture of shares purchased or the divestiture of substantial assets of Novafora, Transmeta or their respective subsidiaries. Private parties, state attorneys general and/or foreign governmental entities may also bring legal action under antitrust laws under certain circumstances. Based upon an examination of information available relating to the businesses in which Novafora, Transmeta and their respective subsidiaries are engaged, the parties believe that the transaction will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the transaction on antitrust grounds will not be made or, if such a challenge is made, what the result would be. We believe we are not required to make any other filings nor obtain any material governmental consents or approvals before the consummation of the merger. If any approvals, consents or filings are required to consummate the merger, we will seek or make such consents, approvals or filings. See the section entitled “The Merger — Regulatory Matters” beginning on page 64.

 

The exchange of shares of our common stock or preferred stock for cash consideration pursuant to the merger will be a taxable transaction to our stockholders for United States federal income tax purposes, and possibly state, local and foreign tax purposes as well. For United States federal income tax purposes, each holder of shares of our common stock or preferred stock who surrenders such shares for cash in the merger generally will recognize a capital gain or loss equal to the difference, if any, between the cash received and such stockholder’s adjusted tax basis in the shares surrendered.

 

You should read the section entitled “The Merger — Material United States Federal Income Tax Consequences” beginning on page 66 for a more complete discussion of the federal income tax consequences of the merger.

 

Tax matters can be complicated, and the tax consequences of the merger to you will depend on the facts of your own situation. You should consult your own tax advisor to fully understand the tax consequences of the merger to you.

 

Under Delaware law, Transmeta’s stockholders who do not wish to accept cash merger consideration payable pursuant to the merger may seek, under Section 262 of the General Corporation Law of the State of Delaware, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more than, less than or equal to the cash merger consideration payable pursuant to the merger. This right to appraisal is subject to a number of restrictions and technical requirements. Generally, in order to properly demand appraisal, among other things:

 

 

Merely voting against the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement will not preserve your right to appraisal under Delaware law. Also, because a submitted proxy not marked “AGAINST” or “ABSTAIN” will be voted “FOR” the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. If you hold shares in the name of a broker, bank or other nominee, you must instruct your nominee to take the steps necessary to enable you to demand appraisal for your shares. If you or your nominee fails to follow all of the steps required by Section 262 of the General Corporation Law of the State of Delaware, you will lose your right of appraisal. See the section entitled “The Merger — Appraisal Rights” beginning on page 64 for a description of the procedures that you must follow in order to exercise your appraisal rights.

 

Appendix E to this proxy statement contains the full text of Section 262 of the General Corporation Law of the State of Delaware, which relates to your right to appraisal. We encourage you to read these provisions carefully and in their entirety.

 

[          ] will act as the paying agent in connection with the merger.

 

This proxy statement contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “intend,” “anticipate,” “believe,” “will,” “may,” “should,” “would,” and similar expressions are intended to identify forward-looking statements. These statements are based on the current expectations and beliefs of our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These statements are not guarantees of future performance, involve risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed in the forward-looking statements.

 

In any forward-looking statement in which we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement or expectation or belief will result or be achieved or accomplished. Risks and uncertainties pertaining to the following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements:

 

 

These and other important factors are detailed in various filings made periodically by us with the Securities and Exchange Commission (the “SEC”), particularly our annual report on Form 10-K for the year ended December 31, 2007 and subsequent quarterly reports on Form 10-Q. Please review such filings and do not place undue reliance on these forward-looking statements.

 

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We do not undertake any obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances that occur after the date of this proxy statement or to reflect the occurrence of unanticipated events.

TRANSMETA CORPORATION
2540 Mission College Boulevard
Santa Clara, California 95054

 

 

PROXY STATEMENT

 

 

The accompanying proxy is solicited on behalf of the board of directors of Transmeta Corporation, a Delaware corporation (“Transmeta”), for use at a Special Meeting of Stockholders to be held at the [Hilton Santa Clara] located at [4949 Great America Parkway, Santa Clara, California], on [          ], 2009 at [8:00] a.m., Pacific Time. This proxy statement and the accompanying form of proxy will be first mailed to stockholders on or about [          ], 2008.

 

THE SPECIAL MEETING

 

At the special meeting, we are asking holders of record of Transmeta common stock and preferred stock to consider and vote on the following proposals:

 

 

After careful consideration, our board of directors determined that it is advisable, fair to and in the best interests of Transmeta and our stockholders for Transmeta to enter into the merger agreement and to consummate the merger and the other transactions contemplated by the merger agreement.

 

Our board of directors unanimously recommends that our stockholders vote “FOR” the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement.   Our board of directors also recommends that Transmeta stockholders vote “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. Our board of directors will determine whether to make such a proposal to adjourn the special meeting in accordance with its obligations under the merger agreement and its fiduciary duties to our stockholders.

 

In considering such recommendation, you should be aware that some of our directors and officers have interests in the merger that are different from, or in addition to, those of our stockholders generally. See the section entitled “The Merger — Interests of our Directors and Executive Officers in the Merger” beginning on page 58.

 

If your submitted proxy card does not specify how you want to vote your shares, your shares will be voted “FOR” the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.

 

Only holders of record of our common stock and preferred stock at the close of business on [          ], 2008 (the “record date”) will be entitled to vote at the special meeting. At the close of business on the record date, we had [          ] shares of common stock and 300,000 shares of preferred stock outstanding and entitled to vote.

 

A majority of the shares of common stock and preferred stock, determined on an as-converted to common stock basis, outstanding on the record date, present in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. If stockholders cause abstentions to be recorded or brokers holding their clients’ shares of record cause “broker non-votes” (as described below) or abstentions to be recorded, these shares will be considered present and entitled to vote at the special meeting and will be counted toward determining whether or not a quorum is present.

 

The holders of our common stock and our preferred stock will vote together as a single class on the proposal described in this proxy statement. Each share of our common stock is entitled to one vote. Each share of our preferred stock is entitled to 0.71347 votes (that number equal to the number of shares of common stock into which one share of preferred stock could have been converted on the record date) for each share of preferred stock held on that date. The inspector of elections appointed for the special meeting will separately tabulate affirmative and negative votes, abstentions and broker non-votes (described below) for each proposal to be voted on at the special meeting.

 

Under the rules that govern brokers who have record ownership of shares that are held in street name for their clients, who are the beneficial owners of the shares, brokers may vote such shares either as directed by their clients or, in the absence of such direction, in their own discretion on “routine” matters. Where a proposal is not routine, such as the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, a broker who has received no instructions from its clients generally does not have discretion to vote its clients’ unvoted shares on that proposal. When a broker indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, the missing votes are referred to as “broker non-votes.” Those shares would be considered present for purposes of determining whether or not a quorum is present, but would not be considered entitled to vote on the proposal and would not be taken into account in determining the outcome of the non-routine proposal. As such, a broker non-vote on the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement will have the same effect as a vote against the proposal to adopt of the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. The adjournment proposal is considered a routine matter, so unless you have provided otherwise, your broker will have discretionary authority to vote your shares on that proposal.

 

The adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement require the affirmative vote of the holders of a majority of the shares of our common stock and preferred stock, voting together as a single class on an as-converted to common stock basis, outstanding at the close of business on the record date. If a Transmeta stockholder abstains from voting or does not vote, either in person or by proxy, it will count as a vote against the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement.

 

The affirmative vote of the holders of a majority of the shares of our common stock and preferred stock, voting together as a single class on an as-converted to common stock basis, present in person or represented by proxy at the special meeting and entitled to vote is required to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. If a Transmeta stockholder does not vote, either in person or by proxy, such failure will not affect the outcome of any proposal to adjourn the special meeting, but will

reduce the number of votes required to approve such a proposal. If a Transmeta stockholder abstains from voting, either in person or by proxy, it will count as a vote against any proposal to adjourn the special meeting.

 

If your shares are registered in the name of a bank or brokerage, you may be eligible to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms are participating in the Broadridge Investor Communication Services online program, which provides eligible stockholders who receive a paper copy of the proxy statement with the opportunity to vote via the Internet or by telephone. If your bank or brokerage firm is participating in Broadridge’s program, your voting form from the bank or brokerage firm will provide instructions. If your voting form does not reference Internet or telephone information, please complete and return the accompanying paper proxy card in the enclosed self-addressed, postage-paid envelope.

 

At the close of business on the record date, our directors and executive officers and their affiliates owned and were entitled to vote [          ] shares of our common stock, which represented approximately [     ]% of the shares of our common stock outstanding on that date.

 

In connection with the merger agreement, all of our directors and executive officers have entered into voting agreements with Novafora pursuant to which each of them have agreed, in their capacities as stockholders, to, among other things, vote the shares of our common stock held by such stockholder in favor of adoption of the merger agreement. These stockholders hold an aggregate of [          ] shares of our common stock as of the close of business on [          ], 2008, the record date set by our board of directors for the special meeting, which constitute approximately [     ]% of the shares of our common stock outstanding on that date. See the section entitled “The Merger — Voting Agreements” beginning on page 57.

 

All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement and “FOR” any proposal by our board of directors to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement.

 

Shares represented at the special meeting but not voting, including shares for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

 

Only shares affirmatively voted for the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement, including properly executed proxies that do not contain voting instructions, will be counted as favorable votes for that proposal. Only shares affirmatively voted for any proposal by our board of directors to adjourn the special meeting, including properly executed proxies that do not contain voting instructions, will be counted as favorable votes for such a proposal. If a Transmeta stockholder abstains from voting, it will effectively count as a vote against the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement and a vote against the adjournment of the special meeting. If a Transmeta stockholder does not vote, either in person or by proxy, it will effectively count as a vote against the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement, and it will not affect the outcome of any proposal to adjourn the special meeting, but will reduce the number of votes required to approve any such proposal.

 

Brokers who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those

customers. Any “broker non-votes” would be considered present for purposes of determining whether or not a quorum is present, but would not be considered entitled to vote on a particular proposal. Failing to instruct your broker on how to vote your shares on the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement will have the same effect as a vote against such proposal. Failing to instruct your broker on how to vote your shares on any proposal to adjourn the special meeting will have no effect on the outcome of such a proposal, but will reduce the number of votes required to approve that proposal.

 

The proxy card accompanying this Proxy Statement is solicited on behalf of our board of directors for use at the special meeting. Stockholders are asked to complete, date and sign the accompanying proxy card and promptly return it in the enclosed envelope or otherwise mail it to us. All executed, returned proxies that are not revoked will be voted in accordance with the included instructions. Signed proxies that are returned without instructions as to how they should be voted on a particular proposal at the special meeting will be counted as votes “FOR” such proposal. We are not aware of any other matters to be brought before the special meeting. However, as to any business that may properly come before the special meeting, the proxies that are executed and returned prior to the special meeting will be voted in accordance with the judgment of the persons holding such proxies.

 

In the event that sufficient votes in favor of the proposal are not received by the date of the special meeting, the persons named as proxies may propose one or more adjournments of the special meeting to permit further solicitation of proxies. Any such adjournment would require the affirmative vote of the majority of the outstanding shares present in person or represented by proxy at the special meeting.

 

Stockholders should not send stock certificates with their proxies. A letter of transmittal with instructions for the surrender of our common stock certificates will be mailed to our stockholders as soon as practicable after consummation of the merger. The instructions will provide that, at the election of the stockholder, certificates may be surrendered, and the merger consideration in exchange for the certificates may be collected, by hand delivery.

 

A stockholder may revoke a proxy at any time before it is voted. A proxy may be revoked by signing and returning a proxy with a later date, by delivering a written notice of revocation to us stating that the proxy is revoked or by attending the special meeting and voting in person, although attendance of the special meeting in person will not in and of itself revoke a valid proxy that was previously delivered. Please note, however, that if a stockholder’s shares are held of record by a broker, bank or other nominee and that stockholder wishes to vote at the special meeting, the stockholder must bring to the special meeting a letter from the broker, bank or other nominee confirming the stockholder’s beneficial ownership of the shares and that the broker, bank or other nominee is not voting the shares at the special meeting.

 

We are paying the expenses of soliciting the proxies to be voted at the special meeting. Following the original mailing of the proxies and other soliciting materials, we will request that brokers, custodians, nominees and other record holders of our capital stock forward copies of the proxy and other soliciting materials to persons for whom they hold shares of capital stock and request authority for the exercise of the proxies. In these cases, we may, upon their request, reimburse such record holders for their reasonable expenses. Proxies may also be solicited by some of our directors, officers and regular employees, without additional compensation, in person or by telephone.

 

We also may engage the services of a proxy solicitor to aid in the solicitation of proxies and to verify records relating to the solicitation. All costs of such solicitation of proxies would be borne by us. We anticipate that should we retain the services of a proxy solicitor, that firm would receive customary fees for these services, which would not be significant. The extent to which these proxy soliciting efforts will be necessary depends entirely upon how promptly proxies are received. You should send in your proxy by mail without delay.

 

Under the General Corporation Law of the State of Delaware, holders of Transmeta common stock and preferred stock who do not vote in favor of adoption of the merger agreement and approval of the merger and the

other transactions contemplated by the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is consummated, but only if they submit a written demand for appraisal prior to the vote on the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement, and they comply with the provisions of Section 262 of the General Corporation Law of the State of Delaware set forth in full at Appendix E to this proxy statement. See the section entitled “The Merger — Appraisal Rights” beginning on page 64.

 

If you need assistance in completing your proxy card or have questions regarding the Transmeta special meeting, please contact:

 

Transmeta Corporation
2540 Mission College Boulevard
Santa Clara, California 95054
Telephone: 781-652-8875
Attention: Investor Relations
E-mail: investor-relations@transmeta.com

 

The following discussion summarizes the material terms of the merger. Stockholders should read the merger agreement, which is attached as Appendix A to this proxy statement, carefully and in its entirety.

 

Novafora has agreed to acquire Transmeta Corporation under the terms of the Agreement and Plan of Merger, dated as of November 17, 2008, by and among Novafora, Transformer Acquisition LLC (“merger sub”) and Transmeta (the “merger agreement”) that is described in this proxy statement and attached as Appendix A . Under the merger agreement, Transmeta will be merged with and into merger sub, which will be the surviving entity in the merger. Our stockholders will receive cash in the merger in exchange for shares of Transmeta common stock and preferred stock held by them.

 

If the merger is consummated, (i) holders of our preferred stock will receive $7.50 in cash, without interest, in exchange for each share of our preferred stock held immediately prior to the effective time of the merger, unless such shares are converted to shares of common stock prior to the effective time, in which case such shares will receive the common share consideration described below, and (ii) holders of our common stock will receive an amount in cash, without interest, in exchange for each share of our common stock held immediately prior to the effective time of the merger, equal to the quotient obtained by dividing (1) the aggregate common stock merger consideration (determined in the manner provided below) by (2) the number of shares of our common stock outstanding as of the effective time of the merger, assuming the exercise of all vested in-the-money options.

 

The aggregate common stock merger consideration equals $255.6 million plus the aggregate exercise price of the vested in-the-money options less the sum of (i) the aggregate cash merger consideration payable with respect to shares of our preferred stock outstanding immediately prior to the effective time of the merger and (ii) the maximum aggregate cash consideration payable with respect to warrants to purchase Transmeta common stock outstanding as of the effective time of the merger, determined pursuant to the terms of such warrants.

 

The aggregate common stock merger consideration is subject to upward adjustment by the sum of, in each case determined as of the effective time of the merger:

 

 

In addition, the aggregate common stock merger consideration is subject to downward adjustment by the sum of, in each case determined as of the effective time of the merger and, with respect to each of the amounts under the first eight bullets below, only to the extent unpaid as of the effective time of the merger:

 

 

 

The amount of any adjustments to the aggregate common stock merger consideration will not be known until the closing of the merger and will be dependent to a large extent on the timing of closing. Based in part on our current expectation that the merger will be consummated in the first quarter of 2009, we estimate that stockholders will receive between $18.70 and $19.00 for each outstanding share of Transmeta common stock held by them. If Transmeta stockholders approve the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement at the special meeting, we anticipate consummating the merger within a few days following the special meeting. Assuming the merger is consummated within a few days following the special meeting on [          ], 2009, we estimate that stockholders will receive between $[  .  ] and $[  .  ] for each outstanding share of Transmeta common stock held by them.

 

Options

 

If the merger is consummated, (i) each outstanding option to purchase shares of Transmeta common stock with a per share exercise price less than the per share cash merger consideration to be received by holders of our common stock in the merger, to the extent vested and exercisable as of the effective time of the merger (the “vested in-the-money options”), will be converted into the right to receive an amount in cash equal to the product obtained by multiplying (1) the difference between the per share cash merger consideration to be received by holders of our common stock in the merger, as described above, and the per share exercise price of such vested in-the-money option, by (2) the number of vested shares of Transmeta common stock underlying such vested in-the-money option, and (ii) each unvested option to purchase shares of Transmeta common stock and each outstanding option to purchase shares of Transmeta common stock with a per share exercise price greater than or equal to the per share cash merger consideration to be received by holders of our common stock in the merger, whether vested or unvested, will be automatically cancelled without any consideration payable in respect thereof.

 

Warrants

 

If the merger is consummated, holders of outstanding warrants to purchase Transmeta common stock will continue to remain outstanding, with such adjustments as specified by the terms and conditions of the warrants, and Transmeta’s contractual obligations under the warrants will be assumed by Novafora.

 

Pursuant to the terms of the outstanding warrants to purchase Transmeta common stock, upon and following the consummation of the merger, the holder of each of these warrants will have the right to receive, upon exercise of the warrant, a cash payment equal to (1) the number of shares of Transmeta common stock underlying the warrant multiplied by (2) the per cash merger consideration to be received by holders of our common stock in the merger. In addition, the holder of a warrant will be entitled to receive, in lieu of the cash payment described in the preceding sentence and at the holder’s option, exercisable at any time concurrently with or within 30 days following the consummation of the merger, cash in an amount equal to the value of the remaining unexercised portion of the warrant, as determined using the remaining term of the warrant as of the closing date of the merger, in accordance with a Black-Scholes option pricing model.

 

For the past several years we have actively pursued a variety of business development opportunities to improve our financial results and maximize our stockholder value, including strategic collaborations, licensing transactions, strategic financings, acquisitions and divestitures. From time to time we have also received indications of interest

from third parties regarding strategic transactions, such as investments, acquisitions and divestitures. We have also regularly engaged and sought advice from independent legal and financial advisors regarding such opportunities.

 

In 2007, after having experienced negative cash flows from operations and incurred substantial operating losses for several years, we restructured our operations, ceased or exited several of our legacy lines of business, substantially reduced our workforce, initiated the closure of our offices in Taiwan and Japan, substantially replaced our management team, and focused on developing and licensing our technology and intellectual property as our core business. In October 2007, we entered into and announced a binding term sheet with Intel Corporation (“Intel”) to settle all claims between us and Intel in patent infringement litigation pending in the United States District Court for the District of Delaware. On December 31, 2007, we entered into a settlement agreement with Intel resolving that litigation and licensing to Intel our patents and certain technologies. The settlement agreement provided for Intel to make an initial $150 million payment to us within 30 days of December 31, 2007. In addition, the Intel agreement provided for us to receive from Intel a future stream of annual payments of $20 million on January 31 of each of the next five years, 2009 through 2013 (the “Intel Receivable”). As a result of our 2007 operations, we generated negative cash flows from operations of $43.5 million, and incurred a net loss attributable to common stockholders of $66.8 million.

 

As we entered 2008, we had cash, cash equivalents and short term investments of approximately $18.6 million.

 

On January 15, 2008, our board of directors held its first regular meeting of fiscal 2008. Members of our management team and representatives of our outside legal counsel, Fenwick & West LLP (“Fenwick & West”), were present for that meeting. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. After having met with a number of financial advisors over the prior two months to evaluate our strategic business options, members of our management team made presentations regarding, and our board of directors discussed at length, the benefits and challenges of our various potential business opportunities with other companies (including potential merger and acquisition scenarios involving Transmeta) and possibilities for distributing surplus cash, if any, to stockholders by means of a special dividend or stock repurchase. Members of our management team also reviewed certain goals and opportunities relating to the management of our intellectual property assets and the status of our dialogue with certain other companies and intellectual property acquisition and management firms. Members of our management team also described a proposed policy regarding our management of the cash payment of $150 million that we expected to receive from Intel in January 2008, and our board of directors authorized and directed our management team to adopt and follow that policy to preserve the value of our cash pending decisions about our strategic direction.

 

On January 15, 2008, following the meeting of our board of directors, we initiated a process to select and retain on an exclusive basis a financial advisor to assist us in evaluating our strategic business options.

 

On January 18, 2008, a representative of a company publicly traded in the United States (“Company A”) contacted Lester M. Crudele, our chief executive officer, by telephone and verbally expressed interest in a potential acquisition of Transmeta by Company A, subject to due diligence and pursuant to a corporate nondisclosure agreement between Transmeta and Company A.

 

On January 24, 2008, members of our management team met with representatives of Company A at our corporate offices in Santa Clara, California, to discuss a potential business combination. At that meeting, and in various telephone conversations and meetings over the next few weeks, we provided certain information relating to our business and certain of our assets, as requested by Company A.

 

On January 28, 2008, we timely received from Intel a scheduled payment of $150 million cash pursuant to our definitive settlement agreement with Intel dated December 31, 2007.

 

On January 31, 2008, we became aware of a letter from Riley Investment Management LLC (“RIM”) to our board of directors expressing interest in seeking to acquire all of the outstanding shares of Transmeta common stock not already owned by RIM or its affiliates for $15.50 per share in cash, subject to a number of conditions. The letter from RIM stated that the price represented both a premium of approximately 21% percent over the closing price of our common stock on January 30, 2008 as well as a premium of approximately 19% over the average closing price of our common stock for the 30 previous trading days. In its letter, RIM stated its belief that the $15.50 per share price would provide liquidity to existing investors and return value to existing investors that RIM believes would be

wasted if management proceeds with its current strategy. The proposal was non-binding and subject to conditions enumerated in the letter, including completion of satisfactory due diligence and negotiation of mutually acceptable definitive agreements.

 

On February 1, 2008, we issued a press release and filed a report on Form 8-K confirming our receipt of the January 31, 2008 letter from RIM, and stating that, consistent with its fiduciary duties, our board of directors would carefully consider and evaluate in due course RIM’s unsolicited indication of interest.

 

On February 3, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reported that, as requested by our board of directors, they had approached multiple investment banks about possibly serving as our financial advisor. Members of our management team described the qualifications and characteristics of the candidate investment banks as well as their recent communications with those candidates. Members of our management team and our board of directors also reviewed and discussed in detail the January 31, 2008 written expression of interest by RIM. Following discussion, our board of directors instructed our management team to complete our process for engaging a financial advisor by meeting with candidate investment banks and to engage an investment bank as our financial advisor.

 

After discussions with several candidate investment banks throughout January 2008 and early February 2008, we engaged Piper Jaffray & Co. (“Piper Jaffray”) as our financial advisor on February 6, 2008.

 

On February 7, 2008, we issued a press release and filed a report on Form 8-K announcing our engagement of Piper Jaffray to work with our board of directors and management team to help us to identify options to enhance stockholder value, and to assist us in evaluating and responding to the indication of interest from RIM dated January 31, 2008. We also announced that our board of directors was undertaking a thorough and prompt assessment of RIM’s indication of interest, and stated that we did not expect to complete that assessment by RIM’s requested February 8, 2008 date.

 

Over the next several weeks, members of our management team participated in multiple meetings and telephone conferences with representatives of Piper Jaffray to discuss and provide information regarding our present business and financial position, our various strategic opportunities, our relationships and pending discussions with other companies and our intellectual property and other assets.

 

On February 13, 2008, a representative of a company publicly traded in the United States (“Company B”) contacted members of our management team by telephone and expressed interest in a potential acquisition of Transmeta by Company B, subject to due diligence and pursuant to a corporate nondisclosure agreement between Transmeta and Company B.

 

Also on February 13, 2008, we became aware of a letter dated February 13, 2008 from RIM to our board of directors purporting to extend by two weeks to the close of business on February 28, 2008, the expiration of RIM’s expression of interest dated January 31, 2008. The February 13, 2008 RIM letter further indicated that, at the conclusion of that two-week extension period, any additional bids from RIM would reflect RIM’s estimates of our cash burn from defending against RIM’s inquiries as well as our daily cash burn from operations.

 

On February 14, 2008, we met with a representative of Company B at our corporate offices in Santa Clara, California. At that meeting, the representative of Company B reiterated Company B’s previously stated interest in, among other things, a potential acquisition of our outstanding securities by Company B, subject to due diligence and negotiation of a definitive agreement with customary closing conditions. We discussed a process and next steps for supporting Company B’s evaluation of business.

 

Over the course of the next several weeks, members of our management team participated in continuing but separate strategic discussions with representatives of each of Company A and Company B, including multiple telephone conferences and meetings conducted in our corporate offices and pursuant to corporate nondisclosure agreements. In the course of those discussions, we provided to Company A and Company B confidential information regarding our present business and financial position, our various strategic opportunities and our intellectual property and other assets.

On February 20, 2008, our board of directors held a special telephonic meeting to discuss several matters, including the recent expressions of interest that we had received from Company A, Company B and RIM. Members of our management team and representatives of Fenwick & West and Piper Jaffray were present at that meeting. Representatives of Piper Jaffray discussed with our board of directors and management our current business and strategic position and opportunities, and a proposed process by which we would explore our strategic alternatives. Legal counsel from Fenwick & West reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Piper Jaffray presented to our board of directors a preliminary framework for our board of directors to determine the appropriate next steps with respect to: evaluating our stand-alone business strategy inclusive of buy-side acquisition opportunities, evaluating the unsolicited expression of interest by RIM to acquire Transmeta, handling and evaluating inquiries or expressions of interest received from other potential acquirers (including Company A and Company B), and contacting a select group of additional potential acquirers. Piper Jaffray recommended that we undertake a dual-track evaluation of buy-side and sell-side alternatives and, at an appropriate later date, focus exclusively on one of those tracks. Our board of directors and management discussed in detail the recommendations of Piper Jaffray. Following that discussion, our board of directors authorized and directed our management team and Piper Jaffray to proceed with a dual-track evaluation of our buy-side and sell-side alternatives.

 

During February and March 2008, representatives of Piper Jaffray and our management team conducted a program to identify and evaluate our sell-side strategic alternatives by contacting at least 18 potential acquirers of Transmeta, including potential strategic and financial acquirers. Those potential acquirers were identified based on, among other things, their experience and position in our business and industry, their strategic fit and practical ability to use and derive value from our assets, our experience and relationships with them, and our perception regarding their ability to finance and timely complete a potential acquisition for the benefit of our stockholders. During that period we entered into or reconfirmed existing mutual confidentiality agreements with at least six of those potential acquirers, and we held meetings, telephone conference calls or both with representatives of four interested parties. Of these, we received nonbinding indications of interest from at least four potential acquirers, including RIM, Company A, Company B and a private equity firm (“Company C”). In addition, several of the potential acquirers who declined the opportunity to bid to acquire all of our outstanding capital stock during this period expressed interest in acquiring some or all of our intellectual property, including our patent portfolio.

 

In parallel with our sell-side evaluation, and in accordance with Piper Jaffray’s recommendation and the direction of our board of directors, representatives of Piper Jaffray and our management team also conducted a program to identify and evaluate our buy-side strategic alternatives by contacting at least ten potential partners for us to acquire. These potential buy-side partners were identified based on, among other things, their industry focus, revenue scale and growth prospects, validated technology and customers, and ability to leverage our developed intellectual property for stockholder value. During that period we entered into or reconfirmed existing mutual confidentiality agreements with four of those potential partners, and we held meetings or telephone conference calls or both with all interested parties.

 

During this same period, and throughout 2008, our management team also continued to focus our business operations on the development, management and monetization of our intellectual property rights, including confidential business discussions or negotiations pursuant to nondisclosure agreement with multiple firms and companies, including both privately held and publicly traded companies, that expressed interest in acquiring, licensing, co-venturing with us or otherwise managing or assisting us in the analysis and marketing of our patents and other intellectual property rights. We coordinated our strategy and efforts to monetize our patent position and intellectual property rights with our evaluation of our strategic business alternatives as part of an integrated effort to maximize stockholder value. Our efforts to monetize our intellectual property rights during 2008 resulted in our achieving significant non-exclusive intellectual property licensing transactions with Advanced Micro Devices, Inc. (“AMD”), Intel, and NVIDIA Corporation (“NVIDIA”) during the second half of 2008, as referenced below.

 

On February 22, 2008, representatives of our management team and Fenwick & West held a conference call with representatives of Company B regarding various due diligence matters, including our intellectual property, contractual commitments, outstanding licenses, and contingent liabilities.

During February 25, 2008 through February 28, 2008, we responded to various diligence requests from Company A regarding our business and financial position intellectual property and contractual commitments.

 

On February 26, 2008, representatives of our management met with representatives of Company B to continue diligence discussions.

 

On February 28, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel from Fenwick & West reviewed with our board of directors its fiduciary duties to Transmeta and our stockholders. Management summarized recent discussions with Company A and Company B. Representatives of Piper Jaffray then summarized recent communications with a select group of additional potential acquirers as well as recent communications with a select group of potential companies that we might consider acquiring. Our board of directors also discussed with management and representatives of Piper Jaffray the January 31, 2008 expression of interest by RIM to acquire all outstanding shares of Transmeta common stock not already owned by RIM or its affiliates for $15.50 per share in cash, and that RIM had extended the deadline for the expiration of that expression of interest until February 28, 2008. Piper Jaffray reviewed the estimated cash liquidation value prepared by management and explained that the proposal from RIM fell below that estimate. Our board of directors then evaluated and discussed the proposal from RIM and the value of our business, assets and opportunities. During this discussion, our board of directors considered, among other things, our belief that the $15.50 per share in cash proposal did not reflect the true potential value of our common stock and that we believed that alternative strategies would likely result in greater returns to our stockholders. Following this discussion, our board of directors unanimously resolved to reject the proposal from RIM and to send to RIM a letter to that effect.

 

On February 28, 2008, we sent to RIM and filed with the SEC a letter to RIM responding to the RIM expression of interest to the effect that its $15.50 per share indication of interest is not in the best interests of our stockholders because it undervalues our assets, business and opportunities.

 

On February 29, 2008, a representative of Company B contacted our representative at Piper Jaffray by telephone and verbally expressed interest in a potential acquisition of our common stock for $16.50 per share in cash, subject to due diligence and a period of exclusivity.

 

Over the course of the next ten days, our management continued to communicate with representatives of Company A and Company B with respect to due diligence inquiries, Company B’s request for exclusivity and the pricing of a potential transaction.

 

On March 5, 2008, our representatives at Piper Jaffray received a telephone call from a representative of Company C expressing potential interest in acquiring the capital stock of Transmeta for cash, subject to due diligence, exclusivity and financing of the Intel Receivable.

 

On March 7, 2008, a representative from Piper Jaffray met with a representative from Company B to discuss the timeline of a potential written indication of interest from Company B.

 

On March 10, 2008, we received a letter from the chief executive officer of Company B expressing interest in acquiring all of our outstanding securities for $17.50 per share in cash, subject to confirmatory due diligence and negotiation of a mutually acceptable definitive acquisition agreement. The letter from Company B stated that Company B’s proposal represented a 36% premium over the closing price of Transmeta common stock of $12.83 on March 7, 2008. The letter further provided that the offer would expire by its terms on March 14, 2008.

 

On March 11, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team summarized the status of our actions to evaluate and manage our intellectual property and our discussions with third parties toward potential strategies for monetization of our patent rights. Management summarized recent discussions with Company A and Company B. Management distributed copies of the March 10, 2008 indication of interest from Company B to acquire all of our outstanding equity securities for cash. Our board of directors then discussed at length Company B’s indication of interest, the value of Transmeta provided for by the indication of interest, and the process of engaging with Company A and Company B. Our board of directors then discussed our

business prospects continuing as a stand-alone company. Representatives of Piper Jaffray summarized recent communications with a select group of additional potential acquirers. Representatives of Piper Jaffray also then summarized recent communications with a select group of potential companies that we might consider to acquire.

 

On March 12, 2008, representatives of our management team and Piper Jaffray met with representatives of Company C and their financial advisors at our corporate offices in Santa Clara, California. Over the course of the next week, representatives of Transmeta and Company C continued to communicate regarding Company C’s due diligence efforts relating to our business and financial position and our intellectual property portfolio, all pursuant to a corporate nondisclosure agreement between Transmeta and Company C.

 

On March 14, 2008, we received a letter from the chief executive officer of Company A expressing interest in acquiring all of our outstanding securities for $16.00 per share in cash, subject to due diligence and a 45-day period of exclusivity in which to negotiate a definitive merger agreement. The letter from Company A stated that the price represented a 21% premium over the average closing prices for our common stock for the period beginning with the announcement of the Intel settlement through to March 13, 2008.

 

On March 15, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Management explained that it had been provided a written indication of interest by Company A to acquire all the outstanding common stock of Transmeta. Our board of directors acknowledged receipt of a copy of that indication of interest and discussed the price set forth in that indication of interest. Our board of directors and management then discussed the response to Company A. Representatives of Piper Jaffray advised our board of directors on the timing and nature of that response. Our board of directors and management then discussed communicating with Company B regarding its indication of interest. Representatives of Piper Jaffray advised our board of directors on those communications.

 

On March 15, 2008, following the meeting of our board of directors, we held a meeting with representatives of Company A to discuss Company A’s offer of March 14, 2008, including our business and financial position, the transaction price and exclusivity.

 

On March 16, 2008, a representative of Company A contacted Mr. Crudele by telephone and verbally indicated that Company A would provide a revised written expression of interest in potentially acquiring Transmeta for approximately $267 million in cash, subject to due diligence. Our management advised our board of directors of that communication on March 16, 2008.

 

On March 17, 2008, we received from Company A a revised non-binding preliminary indication of interest to purchase 100% of the outstanding equity of Transmeta at a total price of $267 million in cash, subject to due diligence and a 30-day period of negotiation exclusivity.

 

Also on March 17, 2008, Piper Jaffray discussed with Company B feedback from the board of directors regarding Company B’s expression of interest.

 

On March 18, 2008, we informed our board of directors that both Company A and Company B had inquired into what transaction price would be needed in order for Transmeta to provide for a period of exclusive negotiations and that management was encouraging both Company A and Company B to move forward without such exclusivity.

 

Over the next few days, members of our management team and our financial advisor communicated with representatives of Company A, Company B and Company C regarding their respective indications of interest and requests for exclusivity. In the course of those communications, we learned that the March 17, 2008 indication of interest from Company A was based in part on a particular treatment of the cash proceeds from the exercise of our outstanding warrants and stock options that would result in a lower per share price payable to our stockholders than was apparent on the face of the March 17, 2008 indication of interest letter from Company A.

 

On March 21, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Representatives of Piper Jaffray summarized multiple recent separate communications with Company A and Company B regarding their respective indications of interest in potentially acquiring Transmeta. Our board of directors and

management then considered further discussions with Company A and Company B. Representatives of Piper Jaffray advised our board of directors on those discussions. Our board of directors discussed strategic discussions with other parties. Our board of directors authorized our management to continue to engage with Companies A, B and C to further advance discussions with each.

 

On March 21, 2008, following the meeting of our board of directors, representatives of Company A advised us that they were withdrawing the March 17, 2008 indication of interest in a potential acquisition of Transmeta by Company A, but that they were interested in exploring potential transactions for Company A to acquire certain of our intellectual property assets.

 

On March 21, 2008, representatives of Company C verbally indicated interest in acquiring all outstanding shares of Transmeta common stock for $16.50 per share, subject to finalization of their due diligence and financing of the Intel Receivable. Company C also expressed interest in partnering with one or more third parties to explore any potential for increasing the offer price per share. Over the course of the next three months, we continued communications and due diligence discussions with representatives of Company C, their financial advisors, and certain third parties that were brought into and included in those discussions by Company C from time to time pursuant to confidentiality agreements.

 

On March 21, 2008, we communicated with representatives of Company B regarding price and process for continued engagement. Over the next week, our management and financial advisor communicated with representatives of Company B and Company C regarding their respective indications of interest, our business and financial position, transaction pricing, their requests for exclusivity and Company C’s ability to arrange financing for the transaction including financing required to monetize the Intel Receivable.

 

On March 28, 2008, a representative of Company B communicated to our representative at Piper Jaffray a verbal revised expression of interest in a potential acquisition of Transmeta for $19.00 per share, subject to due diligence and negotiation of a mutually acceptable definitive acquisition agreement.

 

On March 29, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Our management summarized recent discussions with Company A, and explained that Company A had communicated that it was interested in acquiring assets from Transmeta, but not to acquire Transmeta as a whole. Our management then summarized recent discussions with Company B, explaining that Company B had indicated that it was interested in potentially acquiring all of our outstanding securities for cash and proceeding with confirmatory diligence at a rapid pace. Our board of directors then discussed Company B’s indication of interest. Our management and representatives of Piper Jaffray then summarized recent communications with multiple other parties respecting a potential transaction for the sale of Transmeta. Following the discussion, our board of directors directed management to continue its discussions with Company B and each of the other parties respecting a potential sale transaction.

 

On March 31, 2008, we met with representatives of Company B, including their outside legal counsel and certain finance professionals, at the offices of our legal counsel at Fenwick & West in Mountain View, California. We discussed and proceeded with due diligence, presentations regarding our business and financial position, integration process and set a goal of completing negotiation of a definitive agreement on or before April 7, 2008.

 

On April 1, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team described the meeting with representatives of Company B during the preceding day and summarized the timeline and action items that Company B had proposed for completing diligence and negotiating and signing a definitive agreement for Company B to acquire Transmeta. Members of our management team also summarized certain scheduled discussions with several other third parties regarding potential transactions for the sale of Transmeta. Following the discussion, our board of directors directed management to continue discussions with Company B and each of the other parties respecting a potential transaction for the sale of Transmeta.

On April 1, 2008, we received from Company B a draft form of definitive agreement that included a transaction price of $19.00 per share in cash and a termination fee of $8 million payable by Transmeta to Company B in the event of our termination of the definitive agreement under certain circumstances.

 

Over the next week, our management and financial advisors negotiated with representatives of Company B the draft form of the definitive agreement including termination fee while supporting Company B’s due diligence efforts.

 

On April 3, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Management summarized the recent diligence discussions with Company B, the status of the potential transaction with Company B, and the timeline to completing a potential merger agreement with Company B. Fenwick & West described in detail the material terms of the draft forms of definitive agreement and voting agreement that had been provided by Company B and previously circulated by management to our board of directors. Our board of directors discussed the status and structure of that potential transaction. Following the discussion, our board of directors directed management to continue to evaluate strategic alternatives and to continue to negotiate the terms of a definitive agreement with Company B.

 

On April 5, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Representatives of Piper Jaffray and management described meetings and conversations with Company B regarding a potential transaction for the sale of Transmeta. Our board of directors discussed the status and structure of that potential transaction. Following the discussion, our board of directors directed management to continue its discussions with Company B respecting a potential sale of Transmeta.

 

On April 8, 2008, a representative of a company publicly traded in the United States (“Company D”) communicated to our representative at Piper Jaffray an expression of interest in a potential transaction for Company D to acquire or license certain technology and related intellectual property from Transmeta.

 

During April 8, 2008 to April 12, 2008, our representative at Piper Jaffray encouraged representatives of Company D to consider an acquisition of 100% of our outstanding securities rather than a more limited transaction involving certain of our technologies and intellectual property. On April 13, 2008, our management and representatives of Company D amended an existing corporate nondisclosure agreement between Transmeta and Company D in order to support our confidential business and due diligence discussions with Company D through at least the second quarter of 2008. Over the course of the next month, our management and financial advisors participated in multiple meetings and telephone conferences with representatives of Company D to support Company D’s due diligence efforts regarding our business and financial position, and our intellectual property and other assets.

 

On April 16, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Representatives of Piper Jaffray and management described recent meetings and conversations with each of Company B and Company D regarding potential transactions for the sale of Transmeta. Our board of directors discussed the terms, parties and timelines for each such potential transaction. Members of our management team and Piper Jaffray summarized discussions with several other parties regarding the potential sale of Company assets. Following the discussion, our board of directors directed our management to continue its discussions with Company B, Company C, Company D and each of the other parties respecting a possible transaction for a sale of Transmeta.

 

During the next two weeks, we met and communicated by telephone with representatives of each of Company B, Company C and Company D in response to their respective requests for information about our business and intellectual property.

 

On April 29, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of

directors and management their fiduciary duties to Transmeta and our stockholders. Representatives of Piper Jaffray made a presentation and members of our management team summarized recent discussions with Company B, Company C and Company D. Our board of directors discussed at length potential structures for transactions with each of those parties. Our board of directors then discussed our business prospects continuing as an independent company and our recent communications with Bryant Riley of RIM regarding Mr. Riley’s request for representation on our board of directors. Our board of directors directed Piper Jaffray and management to pursue discussions with Company B, Company C and Company D, and to consider further a select group of potential companies that we might consider as acquisition candidates.

 

On May 6, 2008, a representative of Company B informed us that Company B had decided that it was unable to pursue an acquisition of Transmeta, but that Company B would be interested in exploring potential alternative transactions, including the acquisition of certain of our intellectual property assets.

 

On May 8, 2008, a representative of Company D contacted our representatives at Piper Jaffray and verbally expressed an offer to purchase all outstanding shares of Transmeta common stock for $18.00 per share in cash, subject to due diligence and negotiation of a mutually acceptable definitive agreement.

 

On May 14, 2008, members of our management team met with representatives of Company D to discuss our business and financial position and conduct due diligence.

 

Over the next two months, our management and financial advisors communicated with representatives of Company D in support of Company D’s due diligence efforts, discussions on our business and financial position and negotiation on transaction price.

 

On May 23, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Our board of directors discussed the process to consider nominations to our board of directors to be submitted at our annual meeting of stockholders and the two candidates proposed by RIM. At the special meeting, our board of directors authorized Transmeta management to continue to evaluate strategic alternatives and to continue discussions with Company C and Company D as well as continue to evaluate selected companies to acquire.

 

On or about May 23, 2008, representatives of Novafora contacted John O’Hara Horsley, our executive vice president, general counsel and secretary, and suggested, among other things, that Mr. Horsley meet with representatives of Novafora to explore strategic opportunities between Transmeta and Novafora. Mr. Horsley expressed interest in such a meeting and suggested that Novafora enter a confidentiality agreement with Transmeta as part of our process for evaluating our strategic alternatives.

 

On May 27, 2008, Mr. Horsley held a confidential business meeting with representatives of Novafora in Santa Clara, California. Mr. Horsley confirmed that we were in the process of exploring our strategic alternatives, including potential business combinations with other companies; that we were already engaged in confidential discussions under nondisclosure agreements with multiple third parties that had expressed interest in a business combination with Transmeta or in acquiring or licensing our intellectual property; and that several third parties had also expressed interest in buying all or part of our patent portfolio. Novafora expressed interest in discussing a potential business combination or other strategic relationship whereby Novafora could leverage our intellectual property position and gain access to certain of our technologies. Mr. Horsley recommended that Novafora enter a nondisclosure agreement and establish communication with our financial advisors at Piper Jaffray, and proposed that a broader management group from both companies meet for further discussions. That same day, Novafora contacted our financial advisor at Piper Jaffray to make introductions and begin negotiating a nondisclosure agreement in the context of our strategic alternatives evaluation process.

 

During early June 2008, we were contacted on a confidential basis by several individuals, including former employees of Transmeta who were not then affiliated with any business organization, who expressed interest in developing a proposal for a potential acquisition of Transmeta or certain of our intellectual property with outside financing.

On June 4, 2008, representatives of Novafora contacted Mr. Horsley to confirm Novafora’s interest in further discussions with Transmeta and to discuss the scope and scheduling of follow-up telephone conferences and business meetings.

 

On June 6, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team summarized recent discussions with Company C, Company D and Novafora, and our board of directors discussed at length potential structures of transactions with each entity. Our board of directors then discussed our business prospects as a stand-alone entity. Management described discussions with various third parties toward potential strategies for monetization of our patent rights, including a term sheet recently proposed by another company providing, among other things, for Transmeta to grant a non-exclusive license to our patents and certain of our technologies. R. Hugh Barnes, the chairman of our board of directors, described recent communications with Bryant Riley regarding RIM’s request for representation on our board of directors, and Murray Goldman, the chairman of the nominating and governance committee of our board of directors, reported on meetings and interviews with each of Mr. Riley and J. Michael Gullard on behalf of the committee. At the meeting, our board of directors authorized our management team to continue to evaluate strategic alternatives and to continue to engage with Company D and Novafora as well as continue to selectively investigate companies to acquire.

 

On June 6, 2008 and June 7, 2008, representatives of Novafora provided to our management some information about Novafora pursuant to our mutual confidentiality agreement, and representatives of both companies conducted a telephone conference including Messrs. Crudele and Horsley for Transmeta, and representatives of Novafora.

 

On June 10, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Mr. Barnes described recent communications with Bryant Riley of RIM regarding Mr. Riley’s request for representation on our board of directors. Legal counsel from Fenwick & West summarized the terms of an agreement proposed by counsel for Mr. Riley and RIM. Our board of directors discussed those terms and directed our management and our legal counsel at Fenwick & West to continue their discussions with Mr. Riley and RIM.

 

On June 17, 2008, representatives of Novafora met with members of our management team at Transmeta’s offices in Santa Clara, California, to discuss the potential for a business combination or other strategic relationship between Novafora and Transmeta. Messrs. Crudele and Horsley and Sujan Jain, our executive vice president and chief financial officer, attended the meeting for Transmeta, along with a representative of Piper Jaffray.

 

On June 18, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. As requested and discussed by our board of directors at its meeting of June 6, 2008, members of our management team outlined and described our present strategic alternatives, including recent communications with various third parties and candidate scenarios for time frames to completion, as well as dividend, stock repurchase and corporate dissolution scenarios. Representatives of Piper Jaffray reported on the status of discussions with certain third parties and outlined steps and timing for a potential dissolution process. Legal counsel described recent communications from and with Bryant Riley and legal counsel for RIM regarding Mr. Riley’s request for representation on our board of directors.

 

On June 26, 2008, the financial advisor for Company C contacted our representative from Piper Jaffray to communicate that Company C was to partner with a private equity company (“Company E”), and communicated a verbal indication in the range of $16.50 per share to acquire 100% of the equity of Transmeta.

 

On July 1, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reported on certain recent communications with various third parties regarding our strategic alternatives. Mr. Barnes also described recent communications with Bryant Riley of RIM regarding Mr. Riley’s request for

representation on our board of directors. Mr. Barnes summarized the terms of a proposed agreement respecting these matters, and our legal counsel responded to questions from our board of directors regarding the terms and process for completing such an agreement. Following discussion, our board of directors authorized our officers to offer and negotiate an agreement with RIM, subject to final approval by our board of directors, and authorized Transmeta management to continue to evaluate strategic alternatives and to continue to engage with Novafora, Company C, Company D and Company E, as well as to continue to investigate potential companies to acquire.

 

On July 3, 2008, Mr. Horsley participated in a telephone conference with representatives of Novafora and outside legal counsel for Novafora, to discuss certain aspects of Transmeta’s intellectual property position, including our patent portfolio and license commitments to third parties.

 

On July 9, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Our board of directors reviewed with our legal counsel and discussed the material terms of a proposed agreement with RIM and Mr. Riley. After a full discussion, our board of directors unanimously approved the agreement, pursuant to which we agreed to appoint Mr. Gullard to our board of directors and to nominate Mr. Riley for election to our board of directors at our annual meeting of stockholders, and Mr. Riley and RIM agreed to abide by certain confidentiality and standstill obligations through the completion of our 2010 annual meeting, including an agreement not to acquire an aggregate beneficial ownership position of more than 13% of Transmeta’s outstanding common stock. We subsequently entered into the agreement with RIM on July 11, 2008.

 

On July 14, 2008, a representative of Company D communicated by telephone to our management that Company D was interested in exploring alternative transactions in preference to the proposed acquisition of 100% of the stock of the Company.

 

On July 15, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team summarized for our board of directors our recent separate discussions with Novafora, Company C (including Company E), Company D and various other third parties. Our board of directors discussed at length scenarios and contingencies for potential transactions with various third parties. Management also reported on our efforts and difficulties in attempting to monetize for present value of the Intel Receivable, including discussions with banks, private equity funds and other financial institutions. Our board of directors authorized management to negotiate with Intel to accelerate that future income stream. Management also described discussions with third parties toward potential strategies for monetization of our patent rights, including the terms of a proposed non-exclusive patent and technology license by us to NVIDIA. Following discussion, our board of directors unanimously approved the proposed terms of a non-exclusive license to NVIDIA and authorized our officers to negotiate, execute and deliver a definitive agreement with NVIDIA on those terms.

 

During the third quarter of 2008, consonant with the instruction of our board of directors, we engaged with Intel in confidential business discussions in order to explore, among other things, Intel’s interest in certain of our legacy technologies and Intel’s willingness to accelerate payment of the Intel Receivable, which removed buyer uncertainty regarding both the receipt of the future payments from Intel by a successor as well as the present valuation of that future income stream. The substance of our 2008 discussions with Intel were and are confidential, but the fact of those discussions is mentioned here because they materially affected our strategy and the pacing of our negotiations with other parties for the potential sale of Transmeta, and we believe that such discussions produced a transaction during the third quarter of 2008 that materially enhanced our ability to realize the fullest possible value for our stockholders.

 

Between July 21, 2008 and August 1, 2008, Company C, Company D and Company E conducted diligence with Transmeta on a variety of topics, including, but not limited to business and financial position contracts, contingent liabilities and intellectual property.

 

On July 30, 2008, Novafora informed us that they had hired GCA Savvian Advisors (“Savvian”) to assist Novafora in its efforts to acquire Transmeta. In the past, we had from time to time discussed some of our potential

strategic alternatives with Savvian advisory personnel under nondisclosure agreements, and a predecessor firm to GCA Savvian had previously provided financial advisory services for Transmeta, although that prior advisory relationship had been fully terminated prior to Savvian’s engagement by Novafora to assist Novafora in its efforts to acquire Transmeta. Between July 30, 2008 and August 14, 2008, Novafora’s financial advisors reviewed certain information and materials that we had provided previously to Novafora.

 

On August 1, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Management reported that we had completed and entered into a non-exclusive patent and technology licensing agreement with NVIDIA on terms and conditions previously approved by our board of directors. Members of our management team then summarized recent discussions with Novafora, Company C, Company D, Company E and various other third parties regarding our strategic alternatives. At the special meeting, our board of directors authorized Transmeta management to continue to evaluate strategic alternatives and to continue to engage with Novafora, Company C, Company D and Company E, as well as to continue to investigate potential companies to acquire.

 

On August 6, 2008, we released our financial results. In addition, we announced that we would continue to actively explore a full range of strategic alternatives and continue to be engaged in discussions with other companies about potential ways to increase value for all of our stockholders.

 

On August 14, 2008, we were contacted by Savvian on behalf of Novafora requesting additional information for Novafora’s due diligence process. We communicated with Novafora’s representatives and financial advisor regarding due diligence requests and our business and financial positions, including a conference call on August 19, 2008.

 

Also on August 14, 2008, Company C submitted a non-binding letter of intent to acquire Transmeta for $257 million in cash, or approximately $16.86 per share of Transmeta’s common stock, based on certain assumptions and subject to due diligence, financing of the Intel Receivable and other conditions. The letter of intent from Company C further provided that the transaction price assumed either the liquidation of the Intel Receivable at the time of closing with a third party approved by Company C or the transfer of the Intel Receivable to an independent trust for the benefit of Transmeta’s stockholders. Based on Company C’s assumptions, the letter of intent from Company C contemplated a per share price of approximately $16.86, or a premium of 24% over our 200 trading day average price of $13.62 per share. The letter of intent from Company C provided a period of 30 to 45 days for Company C to conduct its due diligence investigation of Transmeta, an exclusivity period of at least 60 days during which we would not engage in any discussion or negotiation regarding any potential alternative transaction, and a termination fee of 3% payable by us to Company C in the event of our termination of the definitive agreement under certain circumstances. The letter of intent from Company C provided that it would expire by its terms if not accepted in writing on or before August 20, 2008.

 

Over the course of the next two weeks, members of our management team and representatives of Piper Jaffray communicated by telephone and email with representatives of Company C and their financial advisors to understand in detail the letter of intent submitted by Company C. In the course of those discussions, we learned that the transaction price of $257 million included the value of the Intel Receivable at a face value of $100 million with a downward adjustment to transaction price if the value received on liquidation of the Intel Receivable was less than $100 million. In addition, the transaction price included the cash proceeds from the exercise of our outstanding warrants and in-the-money stock options. These adjustments to the transaction price would have yielded a transaction value that was more than $20 million less than the value of Transmeta’s cash plus certain liquid assets minus certain liabilities.

 

On August 15, 2008, a representative from Piper Jaffray met with an individual affiliated with Company E to discuss Company E’s continued interest in a potential acquisition of Transmeta and the possibility of a transaction with Company E separate from a combined transaction with Company C and Company E combined.

 

On August 20, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management

team reported that we had received a letter of intent from Company C expressing interest in acquiring Transmeta. Our board of directors discussed that proposal and determined that it did not sufficiently value Transmeta. Our board of directors directed management to continue negotiations with Company C and Company E. Members of our management team then summarized the status of discussions with other third parties regarding various strategic alternatives. Management and legal counsel from Fenwick & West reviewed the requirements to be satisfied if we were to decide to distribute a portion of our cash to stockholders by cash dividend or stock repurchase. Our board of directors directed management to prepare and provide a comprehensive analysis of dividend and stock repurchase scenarios as an alternative to a potential sale of Transmeta.

 

On August 27, 2008, Novafora’s financial advisor at Savvian sent us a written non-binding indication of interest from Novafora to acquire Transmeta for an amount equal to Transmeta’s net cash position at closing plus $40 to $60 million subject to due diligence, financing and 45-day period of exclusivity. The Novafora indication of interest requested a response on or before September 5, 2008.

 

Upon receiving the Novafora expression of interest on August 27, 2008, we contacted Novafora’s representatives and financial advisor to discuss the terms of that proposal and sources of Novafora’s proposed financing. In the course of those discussions, and upon our inquiry, Novafora’s financial advisor informed us that the initial $40 to 60 million cash offer from Novafora included the value that Novafora proposed to pay for the Intel Receivable.

 

On August 28, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Management reported that we had received from Novafora a proposal to acquire Transmeta. Our board of directors discussed that proposal and determined that it did not provide sufficient value for Transmeta stockholders. Our board of directors directed management to continue negotiations with Novafora. Management then summarized the status of discussions with Company C, Company D, Company E and other third parties regarding various strategic alternatives. Management provided an overview of requirements to be satisfied if we were to distribute a portion of our cash to stockholders via cash dividend or stock repurchase and a comprehensive analysis of the same. Our board of directors directed management to prepare further analysis of a potential cash dividend or stock repurchase, as well as analysis of a complete liquidation and corporate dissolution process as an alternative to a potential sale of Transmeta.

 

On September 2, 2008, representatives of Company C communicated via telephone to us that Company C was revising the value of its cash offer to approximately $10 million to $15 million less than the value of Transmeta’s cash plus certain liquid assets minus certain liabilities.

 

On September 8, 2008, members of our management team met with certain individuals affiliated with Company E regarding a potential acquisition of our outstanding securities by Company E.

 

On September 16, 2008, members of our management team held a meeting with representatives of Company E regarding a potential acquisition of our outstanding securities by Company E, subject to due diligence. During the meeting, we discussed our business and financial position, various strategic opportunities and intellectual property and other assets.

 

On September 16 and 17, 2008, we were contacted by and communicated with representatives and financial advisors for Novafora regarding Novafora’s interest in a potential acquisition of Transmeta, including, among other things, potential means for the monetization of the Intel Receivable.

 

On September 17, 2008, we received from Novafora a revised non-binding indication of interest signed by the chief executive officer of Novafora, proposing to acquire Transmeta for approximately $16.00 to 16.50 per share, subject to due diligence, financing and a period of exclusivity.

 

On September 18, 2008, we held our annual meeting of stockholders and a regular meeting of our board of directors. At the annual meeting, among other things, we elected three directors in Class II, as follows: Robert V. Dickinson, Bryant R. Riley, and T. Peter Thomas. Effective as of September 18, 2008, William P. Tai retired from our board of directors, in accordance with an unrelated plan of retirement previously reported in August 2008.

 

Immediately following our annual meeting of stockholders on September 18, 2008, we held a regular meeting of our board of directors at which members of our management team and representatives of Fenwick & West and

Piper Jaffray were present. Mr. Riley joined and participated in that meeting as a member of our board of directors. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team summarized the status of negotiations and material terms of a proposed agreement with Intel. Following discussion, our board of directors unanimously authorized and directed our officers to complete negotiations and enter into an agreement with Intel substantially in accordance with those terms. Members of our management team presented to our board of directors a proposal for deciding among our strategic alternatives, namely, to pursue a sale of Transmeta or our assets and, subject to the nature of any such transaction, to distribute to stockholders a cash dividend, and to dissolve Transmeta. Messrs. Barnes and Crudele reported that they had received from Novafora earlier that morning a revised written proposal to acquire Transmeta. Our board of directors discussed the Novafora proposal. Management and representatives of Piper Jaffray summarized the status of discussions with other third parties regarding various strategic alternatives, including intellectual property asset monetization possibilities. Management then summarized requirements to be satisfied if we were to distribute a portion of our cash to stockholders via cash dividend or stock repurchase, and presented a comprehensive analysis of the same. Management then summarized the time scale and requirements to be satisfied if we were to dissolve Transmeta. Representatives of Piper Jaffray recommended that, immediately upon entering into and announcing our expected agreement with Intel to accelerate the payment of the Intel Receivable, we should consider announcing and initiating a public auction process and re-approach the potential buyer community with the goal of achieving a sale of Transmeta. Among other things, it was observed that our monetization of the Intel Receivable should remove buyer uncertainty regarding both the receipt of those future payments from Intel by a successor as well as the present valuation of the Intel Receivable. Following discussion, our board of directors unanimously authorized and directed our officers to pursue management’s proposal, including announcing a public auction process concurrent with the announcement of the Intel transaction.

 

On September 19, 2008, we conducted a conference call with representatives of Novafora regarding negotiation of the offer price.

 

On September 19, 2008, we also received a proposed term sheet from Company E that provided for unspecified affiliates of Company E to acquire 100% of the issued and outstanding stock of Transmeta for a net enterprise value of $13.5 million, subject to due diligence, exclusivity and various contingencies. The Company E term sheet provided for a five-week process for due diligence and document drafting, but was conditioned upon, among other things, (i) our reimbursement of Company E for all expenses that Company E incurred during that process regardless of whether it resulted in a definitive agreement, and (ii) our entry into an exclusivity agreement during this period. The proposed term sheet assumed among other things that we would monetize the Intel Receivable before the close of the transaction.

 

During the next week, members of our management team and our financial advisors communicated with representatives of Company E regarding the proposed term sheet from Company E, our business and financial position, enterprise value, due diligence and exclusivity periods, and reimbursement of expenses during due diligence and document drafting.

 

On September 23, 2008, we met with Novafora’s representatives and financial advisor at our corporate offices in Santa Clara, California to negotiate price and discuss financing of a potential acquisition of Transmeta by Novafora.

 

On September 23, 2008, we entered into two agreements with Intel relating to the licensing of our technologies and intellectual property. One agreement is a fully paid-up, non-exclusive technology licensing agreement that provides for Transmeta to deliver a copy of certain proprietary Transmeta computing technologies to Intel and grants to Intel a non-exclusive license to use and exploit those technologies commercially. The second agreement is an amendment to the previously announced settlement, release and license agreement that Transmeta and Intel entered into on December 31, 2007. The settlement agreement granted to Intel a perpetual non-exclusive license to all Transmeta patents and patent applications, including any patent rights acquired by Transmeta, now existing or as may be filed on or before December 31, 2017. Among other things, the settlement agreement provided for Intel to make five annual future payments to Transmeta of $20 million per year for each year from 2009 though 2013. The amendment to the settlement agreement accelerated Intel’s remaining future payment obligations under the

settlement agreement, which resulted in Transmeta receiving cash payments from Intel totaling $91.5 million before the end of Transmeta’s current fiscal quarter ending September 30, 2008.

 

On September 24, 2008, we concurrently issued and filed with the Securities and Exchange Commission two public announcements. In one of the press releases, we announced that, with the assistance of Piper Jaffray as our independent financial advisors, we had initiated a process to seek a potential sale of Transmeta and invited interest parties to contact Piper Jaffray. In a separate press release, we also announced that we had entered into two agreements with Intel for the licensing of certain Transmeta technologies and intellectual property and for the accelerated payment of our receivables from Intel, which will result in a one-time, non-refundable payment of $91.5 million in the third quarter of 2008.

 

Following our September 24, 2008 announcement of our public auction process, our representatives at Piper Jaffray and our management contacted or communicated with at least 35 potential acquirers of Transmeta, including potential strategic partners and potential financial partners, during late September and October 2008. Those potential acquirers were identified based on, among other things, their experience and position in our business and industry, their strategic fit and practical ability to use and derive value from our assets, our experience and relationship with them, and our perception regarding their ability to finance and timely complete a potential acquisition for the benefit of our stockholders. We entered into or reconfirmed existing mutual confidentiality agreements with 14 of these third parties, and we held meetings, telephone conference calls or both with all interested parties, of which there were at least ten. Of these, we received nonbinding indications of interest from at least three potential acquirers as described below.

 

On September 26, 2008, our board of directors held a special telephonic meeting to discuss several matters, including primarily an evaluation and discussion of our response to the term sheet presented by Company E and dated September 19, 2008, for a proposed acquisition of Transmeta by Company E of the common stock of Transmeta. Members of our management team and representatives of Fenwick & West and Piper Jaffray were present at that meeting. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team summarized the proposal from Company E (which was due to expire that afternoon if not accepted by us) and our proposed draft response and counterproposal, which included an increase in the purchase price. Members of our management team and representatives of Piper Jaffray reported on their recent telephone discussions with representatives of Company E and their preparation, and in consultation with our financial advisors and outside counsel, of a draft term sheet setting out a potential counterproposal by Transmeta to Company E’s offer. Our board of directors discussed at length the potential transaction and counterproposal to Company E. Following discussion, our board of directors unanimously authorized our executive officers to deliver the counterproposal to Company E. Management and representatives of Piper Jaffray then summarized the status of their discussions with other third parties regarding various strategic alternatives, and the responses that we had so far received to our September 24 press release announcing that we had initiated a process to seek the sale of Transmeta.

 

On September 26, 2008, we sent our counterproposal to Company E that provided, among other things, for: (i) Company E’s payment of an enterprise value of $16.5 million; (ii) no exclusivity; (iii) our agreement to reimburse only up to $100,000 of Company E’s expenses for due diligence if we declined to execute a definitive agreement with Company E within four weeks with terms equal or better than the proposed term sheet; and (iv) removal of the condition prohibiting us from entering into any licensing agreements during the due diligence and negotiation period leading up to a definitive agreement. Our counter term sheet to Company E provided that, if not accepted by Company E, it would expire by its terms on October 3, 2008.

 

During the period between September 26, 2008 and September 30, 2008, members of our management team engaged in several meetings and phone calls with interested parties.

 

On September 29, 2008, we received from Company E a response to our counterproposal of September 26, 2008. Company E’s revised proposal of September 29, 2008 provided, among other things, for: (i) Company E’s payment of an enterprise value of $13.8 million for our business; (ii) our reimbursement of up to $300,000 of Company E’s expenses for due diligence regardless of whether Company E ever entered into a definitive agreement with us; and (iii) our agreement not to enter into any licensing agreements with any other parties during the due

diligence and negotiation period leading up to a definitive agreement. Company E’s revised term sheet provided that, if not accepted by us, it would expire by its terms on October 3, 2008.

 

On September 30, 2008, Piper Jaffray distributed process instruction letters and proposed draft merger agreements to interested parties including, among others, Novafora, Company C, Company E and Company F, a company publicly traded in the United States. The instructions included a proposed bid date of October 20, 2008.

 

On October 1, 2008, Company G, a company publicly traded in the United States, indicated that it wanted to participate in the process. Piper Jaffray subsequently sent Company G the same bid instructions as all other interested parties.

 

On October 3, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team and representatives of Piper Jaffray summarized the status of discussions with third parties regarding various strategic alternatives and the response to our press release announcing that we had initiated a process to seek the sale of Transmeta. Members of our management team then confirmed with the directors that they had received the draft response by us to a written proposal from Company E to acquire Transmeta, which our board of directors had discussed at its previous meeting. Our board of directors discussed at length the potential transaction and directed management to deliver a counterproposal to Company E.

 

On October 3, 2008, following the special meeting of our board of directors, we sent a revised counterproposal to Company E that was substantially the same as our September 26, 2008 counterproposal to Company E, but with a to-be-determined enterprise value for our business. Our October 3, 2008 counterproposal to Company E also provided that it would expire by its terms on October 10, 2008 if not accepted by Company E prior to that time.

 

On the afternoon of October 3, 2008, both by electronic mail and in a telephone conversation with our management, the lead representative of Company E advised us that Company E was withdrawing its term sheet and from further participation in the process.

 

On October 7, 2008, our management held a lengthy telephone conference with management representatives of Novafora and Novafora’s financial advisor, Savvian, regarding our intellectual property portfolio, including our patents and patent rights. Further to that discussion, we provided additional information to Novafora pursuant to nondisclosure agreement on October 8, 2008.

 

Between October 8, 2008 and October 13, 2008, members of our management team and Piper Jaffray held discussions with representatives of and financial advisors for Novafora, Company C, Company F and Company G regarding due diligence inquiries about our business and financial position, intellectual property assets and technologies.

 

On October 16, 2008, representatives of Novafora contacted us to discuss financing and advised us that Novafora might include an affiliate of Intellectual Ventures in a proposal to assist with financing a transaction with Transmeta.

 

On October 20, 2008, we received from Novafora a revised non-binding indication of interest signed by the chief executive officer of Novafora, proposing to acquire 100% of our outstanding capital stock, options and warrants for $11.6 million in addition to our net cash at time of closing, subject to confirmatory due diligence and a 30-day period of exclusivity. The Novafora October 20, 2008 letter stated that Novafora would be working with Intellectual Ventures with respect to a possible arrangement regarding our intellectual property assets and requested that we include representatives of Intellectual Ventures in the confirmatory due diligence process. The Novafora October 20, 2008 letter did not describe the nature or terms of any potential or actual arrangement between Novafora and Intellectual Ventures relating to our intellectual property assets. The Novafora letter requested our response by October 22, 2008. In addition, we received from Novafora a draft merger agreement that included, among other terms, a termination fee of $6 million.

 

On October 20, 2008, Company C communicated a verbal indication to Piper Jaffray that it was increasing the value of its cash offer to represent a discount on Transmeta’s cash of approximately $7 million to $10 million instead of the approximately $10 to $15 million previously communicated on September 2, 2008.

Also on October 20, 2008, representatives of Company G informed Piper Jaffray that Company G would be unable to continue to participate in the process.

 

Also on October 20, 2008, representatives of Company H, a company publicly traded in the United States, indicated that Company H was interested in a potential acquisition of Transmeta and desired to participate in the process. Piper Jaffray provided to the representatives of Company H the same bid instructions as had been provided to other interested parties and noted to Company H that it was materially behind other parties from a timing perspective.

 

On October 21, 2008, we executed an NDA with Company H to discuss a potential acquisition of Transmeta by Company H.

 

On October 21, 2008, we received from Company E a new proposed term sheet for a proposed acquisition of Transmeta that was substantially the same as Company E’s September 29, 2008 proposal, but provided for Company E’s payment of an enterprise value of $12.0 million for our business. Company E’s revised term sheet provided that, if not accepted by us, it would expire by its terms on October 27, 2008.

 

On October 21, 2008 and October 22, 2008, we communicated with representatives of Novafora with respect to Novafora’s October 20, 2008 indication of interest, including transaction price, exclusivity, financing arrangements and termination fee. Novafora agreed with us that our time to respond to the October 20, 2008 expression of interest would be extended beyond the requested date of October 22, 2008 while we continued to engage in due diligence and further negotiation.

 

On October 23, 2008, our board of directors held a regular meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reviewed with our board of directors the proposal for our strategic alternatives, namely to pursue a sale of Transmeta or our assets and, if an asset sale, to distribute to stockholders a cash dividend, to amend our stock options in respect of such cash dividend and to dissolve Transmeta. Members of our management team explained that Novafora had provided a written indication of interest to acquire Transmeta at an $11.6 million enterprise value; and that the Novafora bid might include financing from Silicon Valley Bank, based on commitments made by Novafora and an affiliate of Intellectual Ventures. Management and representatives of Piper Jaffray reported that we had also received from three other third parties potential proposals to acquire Transmeta. Management reported that Company F had orally communicated a preliminary indication of interest earlier that day to acquire us for a purchase price approximately 20% above the average recent trading price of Transmeta common stock. Members of our management team reported that Company E had provided a written indication of interest to acquire Transmeta at a $12 million enterprise value, subject to various conditions, including a five-week period for due diligence and drafting of definitive agreement, our reimbursement of Company E’s due diligence expenses up to $300,000 regardless of whether we ever reached any agreement with Company E, and our agreement not to enter into any new licensing or technology sale agreements of any type with any third party. Our board of directors discussed each of these proposals, including their timing and likelihood of closing. Members of our management team summarized the status of discussions with other third parties regarding various strategic alternatives, including intellectual property asset monetization possibilities. Representatives of Piper Jaffray presented a summary, including a timeline, of the various third party bids and other potential candidate bidders, including Company H, which had expressed interest generally but been unable to develop a bid as of that time. Our board of directors discussed the benefits of and timing for a possible distribution of a portion of our cash to stockholders by means of cash dividend or stock repurchase during the pendency of any such strategic transaction. After discussion, our board of directors instructed our management and financial advisors to continue discussions with third parties about our strategic alternatives and agreed to call several special meetings, as necessary, to evaluate and timely address developments in those discussions during the next few weeks.

 

Between October 24, 2008 and November 2, 2008, members of our management team and representatives of Piper Jaffray and Fenwick & West engaged in a series of telephone conferences and meetings with representatives of Novafora, including Novafora’s financial advisor, legal counsel and representatives of Intellectual Ventures, to negotiate and discuss due diligence, certainty of financing, transaction value, termination fee and Novafora’s request for exclusivity.

On October 28, 2008, we delivered a revised draft of the merger agreement to Novafora, outlining our counterproposal to Novafora, including, among other things, a proposed termination fee of $2 million and our proposals regarding the calculation of the per share merger consideration payable to our common stockholders, the process by which our board of directors could consider alternative proposals, and delivery of a definitive agreement upon financing from Silicon Valley Bank. Thereafter through the execution of the merger agreement on November 17, 2008, our outside legal counsel at Fenwick & West exchanged with Novafora’s legal counsel at Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson Dettmer”) various drafts of the proposed merger agreement and other transaction agreements, including an escrow agreement and voting agreements, and our management began preparing the disclosure schedules contemplated by the merger agreement. During this period, members of Novafora and Transmeta management, as well as their respective financial and legal advisors, conducted numerous telephonic and face-to-face meetings to negotiate the terms and conditions of the merger agreement, the voting agreements and the escrow agreement. In particular, the parties discussed, among other things, various provisions in the draft merger agreement related to our enterprise value, definitive agreement for financing of the merger transaction, the formulation of the “material adverse effect” definition, the process by which our board of directors could consider alternative proposals, certain conditions to closing, the termination rights of the parties and the amount of the termination fee to be paid by us in certain circumstances under the merger agreement. Representatives of Intellectual Ventures and its outside legal counsel, Perkins Coie LLP (“Perkins Coie”), participated in these meetings to discuss the terms and conditions of the transaction, as well as certain representations and warranties and closing conditions in the merger agreement in respect of our intellectual property rights.

 

On October 31, 2008, members of our management team and representatives of Fenwick & West and Piper Jaffray held a meeting at the offices of Gunderson Dettmer in Menlo Park, California with representatives of Novafora, Gunderson Dettmer, Intellectual Ventures, Perkins Coie and Savvian regarding due diligence, process, timing and deal terms. During the course of these discussions and negotiations, Novafora and the Company agreed that, in consideration for our agreement to Novafora’s proposed purchase price and our granting to Novafora a period of exclusivity to negotiate, Novafora would grant us permission and a reasonable period in which to attempt to negotiate a non-exclusive, fully paid-up license with AMD in an effort to increase value for Transmeta stockholders in advance of our entering into any definitive merger agreement with Novafora. Several material terms, including the amount of the termination fee, remained open for negotiation at the conclusion of the meeting.

 

On October 31, 2008, representatives of Company F informed us that Company F could no longer participate in the process.

 

On October 31, 2008, we contacted representatives of Company H who informed us that Company H had conducted significant due diligence, was still interested in considering a potential acquisition of Transmeta, would not be able to develop a bid or indication of interest before the next meeting of our board of directors on November 3, 2008, and would attempt to make a decision during the week of November 3-7, 2008.

 

On November 3, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reviewed with our board of directors the status of negotiations with three different third parties that had recently indicated an interest to acquire Transmeta. Management explained that Transmeta had extensive recent communications with Novafora on a daily basis regarding due diligence, process and deal terms, including, among other terms, the terms of the escrow agreement on financing of the transaction, transaction price, and termination fee. Management also explained that Novafora would not object to the grant of a patent license to AMD and will not reduce the proposed transaction price of net cash at closing plus $11.6 million if we were to enter into such a license with AMD prior to the closing of the transaction. Management also reported that Company F had informed us that Company F no longer wished to pursue an acquisition of Transmeta, and that Company H had expressed interest in potentially pursuing an acquisition of Transmeta and expected to provide us with a more definitive update later in the week. Our board of directors discussed with management the likelihood that Company H might wish to pursue a potential purchase of Transmeta, the likely consideration that Company H might offer to purchase Transmeta, and the likely speed at which Company H would pursue a transaction. Representatives of Piper Jaffray and Fenwick & West provided a detailed description of the proposed terms of a transaction with Novafora,

including the dependency of the transaction on financing from Silicon Valley Bank, the demand by Novafora that we agree to negotiate exclusively with Novafora during the remainder of the week and the open issues in the draft definitive agreement, including a discussion of the termination fee proposed by Novafora. Our board of directors discussed each of these proposals, including their timing and likelihood to close, and considered favorably Novafora’s authorization of our grant of a patent license to AMD prior to the closing of the transaction without a reduction in the proposed transaction price. Following discussion, our board of directors unanimously resolved as follows: (i) that we continue to pursue expeditiously a sale to Novafora and, in connection therewith, an escrow arrangement with Silicon Valley Bank to pre-fund its loan; (ii) that each of the officers of Transmeta is authorized to enter into an agreement to negotiate exclusively with Novafora until 11:59 p.m. on November 7, 2008 based on the response of Company H; (iii) that we pursue expeditiously a non-exclusive patent license to AMD; and (iv) that we seek a more definitive response from Company H of its desire to pursue a potential purchase of Transmeta.

 

On November 3, 2008, our management and representatives at Piper Jaffray contacted representatives of Company H and inquired about the status and timing of Company H’s due diligence and development of an expression of interest for a potential acquisition of Transmeta. Company H’s representatives informed us that Company H did not have a bid, had determined that the development of a bid would require substantial additional time (a month or more) for due diligence, and advised us that we should not reject or decline any acceptable bid from another party based on the prospect of receiving a bid from Company H. Based in part upon that information provided to us by the representatives of Company H, we decided to grant Novafora’s request for a limited period of exclusive negotiation and to pursue such negotiations expeditiously in accordance with the resolutions of our board of directors.

 

On November 4, 2008, after receiving commitment from an affiliate of Intellectual Ventures of its intent to deposit into escrow $11.6 million of the merger consideration payable by Novafora in the merger to our stockholders with Silicon Valley Bank prior to execution of definitive agreement, we executed a letter providing Novafora with a period of exclusive negotiations until 11:59 p.m. on November 7, 2008. In the course of those discussions, Novafora advised us that it expected to enter into a separate arrangement involving the transfer of patent rights from Novafora to an affiliate of Intellectual Ventures following the merger, but we were not and have not been advised of the scope or terms of any such arrangement.

 

On November 4, 2008, representatives of Transmeta, Novafora and Intellectual Ventures, along with our and their respective legal and financial advisors, met to discuss and negotiate the merger agreement.

 

On November 6, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reviewed with board of directors the status of negotiations with Novafora regarding its indication of interest to acquire Transmeta. Management explained that Transmeta has had extensive recent communications with Novafora on a daily basis regarding due diligence, deal terms and process, and opined that the parties had made progress in negotiating the definitive agreement. Representatives of Piper Jaffray and Fenwick & West provided a detailed description of the open terms of the transaction with Novafora, including the representations on intellectual property, closing conditions relating to those representations and the amount of the termination fee. Management reported that they had had extensive interaction with representatives of Novafora and Intellectual Ventures to satisfy their due diligence requests. Representatives from Fenwick & West described the provisions of the voting agreement required by Novafora and the persons and entities to sign it. Management reported that AMD continues to wish to pursue a non-exclusive license of our patents. Management explained that Novafora had indicated that it would not object to our negotiation and grant of a suitable non-exclusive patent license to AMD. Management explained that prior to entering into exclusivity with Novafora, representatives of Piper Jaffray were informed by Company H that it remains interested in pursuing a potential acquisition of Transmeta, but that Company H would require substantial additional time to complete the analysis needed to develop a formal bid. Following discussion, our board of directors unanimously resolved as follows: (i) that we continue to pursue expeditiously a sale to Novafora; (ii) that each of the officers of Transmeta is authorized to extend the agreement to negotiate exclusively with Novafora until 11:59 p.m. on November 16, 2008; (iii) that Transmeta pursue expeditiously a non-exclusive patent license to AMD; and (iv) that our board of directors hold its next meeting on November 8, 2008 at 8:00 a.m. or as soon thereafter as developments warrant.

On November 7, 2008, negotiations of the terms of the merger agreement continued between members of Gunderson Dettmer and Savvian on behalf of Novafora, and Fenwick & West and Piper Jaffray on behalf of Transmeta. A key point of discussion was the continued negotiation of the termination fee.

 

On November 8, 2008, we received the initial draft of the escrow agreement pursuant to which an affiliate of Intellectual Ventures would, prior to the signing of the merger agreement, deposit $11.6 million of the merger consideration payable by Novafora in the merger to our stockholders in an escrow account with Silicon Valley Bank. Over the following week, representatives of Fenwick & West and Gunderson Dettmer, with the participation of representatives of Perkins Coie and Silicon Valley Bank, negotiated and finalized the escrow agreement, which was executed on November 14, 2008.

 

On November 9, 2008, members of our management team and representatives of Fenwick & West and Piper Jaffray held a meeting at the offices of Fenwick & West in Mountain View, California with representatives of Novafora, Gunderson Dettmer, Intellectual Ventures, Perkins Coie and Savvian to discuss open issues in the merger agreement, including, among other terms, the termination fee, and escrow agreement and the process and timeline for the signing of the merger agreement and the escrow agreement. Following the meeting, Novafora requested that we extend the period of exclusive negotiations between Transmeta and Novafora.

 

On November 10, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. Members of our management team reviewed with our board of directors the status of negotiations with Novafora regarding its proposed acquisition of Transmeta, including Novafora’s insistence on a minimum termination fee of $5 million. Management explained that a portion of the purchase price would be escrowed with Silicon Valley Bank by an affiliate of Intellectual Ventures, and that the parties were negotiating the terms of that escrow. Members of our management team also reported the status of negotiations respecting the grant of a non-exclusive patent license to AMD. Our board of directors authorized Transmeta management to continue to negotiate with Novafora and AMD.

 

On November 13, 2008, we entered into an extension of the exclusivity agreement with Novafora until 11:59 p.m. on November 16, 2008.

 

On November 14, 2008, we reached agreement with AMD on the grant of a non-exclusive patent license to AMD, subject to approval by our board of directors.

 

On November 15, 2008, representatives of Transmeta and Novafora reached agreement on the remaining issues in the merger agreement, subject to approval by both companies’ respective boards of directors.

 

On November 16, 2008, our board of directors held a special telephonic meeting at which members of our management team and representatives of Fenwick & West and Piper Jaffray were present. Legal counsel reviewed with our board of directors and management their fiduciary duties to Transmeta and our stockholders. A representative of Piper Jaffray reviewed the financial terms of the proposed definitive merger agreement with Novafora, and Fenwick & West presented an update on the terms of the proposed definitive merger agreement, copies of which had been previously circulated to our board of directors. Fenwick & West reviewed the time line to closing. Piper Jaffray and our management also reviewed the auction sale process, including a review of discussions with interested third parties. At this meeting, Piper Jaffray delivered certain of its written analyses and its oral opinion to our board of directors, subsequently confirmed in writing the next day, to the effect that, and subject to the various assumptions, qualifications and limitations set forth therein, as of November 17, 2008, the consideration provided for in the merger agreement was fair, from a financial point of view, to the holders of the common stock of Transmeta. For a further discussion of the opinion of Piper Jaffray, see the section entitled “The Merger — Opinion of Piper Jaffray & Co. beginning on page 48. After a review of our alternatives to the merger, including other acquisition proposals received during the process, remaining as an independent company and dissolving Transmeta and declaring and distributing cash dividends based on the liquidation of our assets and business, considering, in each case, the value to our stockholders of such alternatives and the timing and likelihood of actually achieving additional value from these alternatives, our board of directors determined in their business judgment that none of these alternatives was reasonably likely to result in value for our stockholders greater than the consideration to be received by our stockholders in the merger. Having concluded that the merger with Novafora was in the best

interests of Transmeta and its stockholders, based on, among other things, the opinion from Piper Jaffray and other factors described in the section entitled “The Merger — Recommendation of our Board of Directors — Reasons for the Merger” beginning on page 45, which factors were discussed at length by our board of directors in such meeting and in prior meetings and individually between members of our board of directors and management, our board of directors unanimously approved the merger agreement, the merger and the related transactions, and unanimously resolved to recommend that our stockholders vote in favor of the adoption of the merger agreement. In addition, our board of directors unanimously approved the non-exclusive patent license agreement with AMD.

 

The merger agreement and the voting agreements were executed and exchanged by the respective parties on the afternoon of November 17, 2008. Transmeta and Novafora publicly announced the execution of the merger agreement after the closing of the U.S. financial markets on November 17, 2008.

 

Reasons for the Merger

 

In the course of reaching its decision to approve the merger and enter into the merger agreement, our board of directors consulted with our senior management, outside legal counsel and our financial advisor, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors:

 

 

Our board of directors also identified and considered a number of positive factors supporting its decision to approve the merger and enter into the merger agreement, including, but not limited to:

 

 

 

 

The board of directors has identified and considered a variety of risks and other countervailing factors in its deliberations concerning whether to approve the merger and enter into the merger agreement, including, but not limited to:

 

 

The preceding discussion is not meant to be an exhaustive description of the information and factors considered by our board of directors, but is believed to address the material information and factors considered. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, our board of directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination. In considering the factors described above, individual members of the board may have given different weight to different factors.

Board of Directors Recommendation

 

After careful consideration, and taking into account all of the factors outlined above, our board of directors unanimously recommends that our stockholders vote “FOR” the adoption of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement.

 

We retained Piper Jaffray & Co. (“Piper Jaffray”) to act as financial advisor to our board of directors, and, if requested, to render to our board of directors an opinion as to the fairness, from a financial point of view, to the holders of our common stock of the per share cash consideration to be received by the holders of our common stock pursuant to the merger agreement (the “Per Share Merger Consideration”).

 

The full text of the Piper Jaffray written opinion dated November 17, 2008, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as Appendix D and is incorporated in its entirety herein by reference. You are urged to, and should, carefully read the Piper Jaffray opinion in its entirety and this summary is qualified by reference to the written opinion. The Piper Jaffray opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, to holders of our common stock (other than Novafora or its affiliates) of the Per Share Merger Consideration to be paid in cash to the holders of Transmeta common stock pursuant to the merger agreement. The Piper Jaffray opinion was directed to our board of directors and was not intended to be, and does not constitute, a recommendation as to how any of our stockholders should vote with respect to the merger, the merger agreement or any other matter. The Piper Jaffray opinion is not intended to confer rights and remedies upon Novafora, any stockholders of Novafora or any affiliates thereof, any of our stockholders, option holders or warrant holders, or any other holder of stock-based compensation of Transmeta. The Piper Jaffray opinion was approved for issuance by a committee of Piper Jaffray employees in accordance with its customary practice.

 

In connection with rendering the opinion described above and performing its related financial analyses, Piper Jaffray:

 

 

 

The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which was reviewed with, and was orally delivered to, our board of directors at a meeting held on November 16, 2008, and was subsequently confirmed in writing by a written opinion dated November 17, 2008. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, this summary does not purport to be a complete description of the analyses performed by Piper Jaffray or of its presentation to our board of directors on November 16, 2008.

 

This summary includes information presented in tabular format, which must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Jaffray or our board of directors. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 14, 2008, and is not necessarily indicative of current market conditions.

 

For purposes of its analyses and with our consent, Piper Jaffray assumed that the Per Share Merger Consideration will be $18.70 per share (subject to adjustment as provided in the merger agreement), based on our assumed diluted shares outstanding upon closing using the treasury stock method as provided by management, the assumed net cash available at closing as provided by management and the $11.6 million payable by Novafora in the merger that is being held in an escrow account, that the amount of our unrestricted cash, cash equivalents and short-term investments as of the effective time of the merger will not be lower than $240 million and that our hypothetical liquidation value was $17.90 per share, based on our assumed diluted shares outstanding upon closing using the treasury stock method as provided by management and the assumed net cash available at closing as provided by management, but excluding the $11.6 million payable by Novafora in the merger that is being held in an escrow account.

 

Selected Public Companies Analysis

 

Piper Jaffray reviewed selected historical Transmeta financial data for the last 12 months ended September 30, 2008 and estimated Transmeta financial data that was prepared by our management as its internal forecasts for calendar year 2009 and compared them to corresponding historical financial data and consensus Wall Street forecasts, where applicable, for publicly traded mid-cap companies that are engaged primarily in intellectual property licensing, that are in standard industrial code 6794 (patent owners and licensors) and that focus primarily on technology. Based on these criteria, Piper Jaffray identified and analyzed the following 13 selected companies:

 

 

 

Piper Jaffray compared valuation multiples for Transmeta derived from the assumed hypothetical liquidation value per share and the assumed Per Share Merger Consideration and historical and projected revenue data for Transmeta, on the one hand, to valuation multiples for the selected companies derived from their market valuation and historical and projected revenue data, on the other hand:

 

 

 

 

The analysis indicated that, based on the estimates and assumptions used in the analysis, the enterprise value implied by the assumed Per Share Merger Consideration of $18.70 per share as a multiple of projected revenue for calendar year 2009 and as a multiple of revenue for the last 12 months was above the range of similar multiples for the selected public companies. Based on the values derived from this analysis added to the assumed hypothetical liquidation value of $17.90 per share, Piper Jaffray also derived a range of implied equity values for our common stock of $17.91 to $18.31 per share. Piper Jaffray noted that the assumed Per Share Merger Consideration was $18.70 per share.

 

Selected Mergers and Acquisitions (“M&A”) Transaction Analysis

 

Piper Jaffray reviewed transactions involving target companies that it deemed comparable to us. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

 

 

Based on these criteria, the following 17 intellectual property business M&A transactions and 51 intellectual property/technology transactions were deemed similar to the merger (acquiror/target):

 

Intellectual Property Business M&A Transactions:

 

 

Piper Jaffray calculated the multiple of enterprise value to revenue for the last 12 months preceding each intellectual property business M&A transaction and the multiple of the enterprise value to projected revenue for the 12 consecutive months following each intellectual property business M&A transaction. Piper Jaffray then compared the results of these calculations with similar calculations based on the assumed Per Share Merger Consideration. This analysis indicated the following multiples:

 

 

 

 

The analysis of the selected intellectual property business M&A transactions indicated that, based on the estimates and assumptions used in the analysis, the enterprise value for Transmeta implied by the proposed Per Share Merger Consideration of $18.70 per share as a multiple of projected revenue for the forward 12 month period

was above the range of similar multiples for the selected intellectual property business M&A transactions and as a multiple of revenue for the last 12 months was within the range of similar multiples for the selected intellectual property business M&A transactions. Based on the values derived from this analysis added to the assumed hypothetical liquidation value of $17.90 per share, Piper Jaffray also derived a range of implied equity values for our common stock of $17.97 to $18.84 per share. Piper Jaffray noted that the assumed Per Share Merger Consideration was $18.70 per share.

 

Intellectual Property/Technology Transactions:

 

 

 

Piper Jaffray calculated the transaction value of each of the intellectual property/technology transactions and compared these calculations with the intellectual property transaction value for Transmeta implied by the proposed Per Share Merger Consideration of $18.70 per share. This analysis indicated the following range of transaction values:

 

 

 

 

The analysis of the selected intellectual property/technology transactions indicated that, based on the estimates and assumptions used in the analysis, the intellectual property transaction value for Transmeta implied by the proposed Per Share Merger Consideration of $18.70 per share was within the range of transaction values for the selected intellectual property/technology transactions. Based on this analysis, Piper Jaffray also derived a range of implied equity values for our common stock of $17.91 to $21.38 per share. Piper Jaffray noted that the assumed Per Share Merger Consideration was $18.70 per share.

Premiums Paid Analysis

 

Piper Jaffray reviewed publicly available information for selected merger or buyout transactions to determine the premiums (or discounts) paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

 

 

Piper Jaffray performed its analysis on 137 transactions that satisfied the criteria, and the table below shows a comparison of premiums paid in these transactions to the premium that would be paid to our stockholders based on the assumed Per Share Merger Consideration of $18.70 per share.

 

 

 

 

 

 

 

This analysis indicated that, based on the estimates and assumptions used in the analysis, the premium over the market price on November 14, 2008 and the unaffected market price on September 24, 2008 for our common stock implied by the assumed Per Share Merger Consideration of $18.70 per share was within the range of premiums paid in the selected transactions as calculated one trading day before announcement, the premium over the market price on November 10, 2008 and the unaffected market price on September 18, 2008 for our common stock implied by the assumed Per Share Merger Consideration of $18.70 per share was within the range of premiums paid in the selected transactions as calculated five trading days before announcement and the premium over the market price on October 20, 2008 and the unaffected market price on August 27, 2008 for our common stock implied by the assumed Per Share Merger Consideration of $18.70 per share was within the range of premiums paid in the selected transactions as calculated twenty trading days before announcement. Based on this analysis, Piper Jaffray also

derived a range of implied equity values for our common stock of $10.31 to $37.46 per share. Piper Jaffray noted that the assumed Per Share Merger Consideration was $18.70 per share.

 

Trading History of Transmeta Common Stock.

 

Piper Jaffray reviewed general trading information concerning Transmeta, including the price of Transmeta common stock over selected periods measured from September 24, 2008 (the date of announcement of Transmeta’s sale process) and November 16, 2008 (the day prior to the date of announcement of the merger). Piper Jaffray presented the recent common stock trading information for Transmeta contained in the following tables:

 

Trading History Prior to Announcement of Sale Process

 

 

Trading History Prior to Announcement of Merger

 

 

Miscellaneous

 

The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray, but does summarize the material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper Jaffray’s view of the actual value of Transmeta.

 

Piper Jaffray’s opinion was one of many factors taken into consideration by our board of directors in making the determination to approve the merger agreement. While Piper Jaffray provided advice to our board of directors during their negotiations with Novafora, Piper Jaffray did not recommend any specific merger consideration.

 

Piper Jaffray relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper Jaffray or discussed with or reviewed by Piper Jaffray. Piper Jaffray further relied upon the assurances of our management that the information provided was prepared on a reasonable basis in accordance with

industry practice, and that they were not aware of any information or facts that would make the information provided to Piper Jaffray incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of the opinion, Piper Jaffray assumed that with respect to hypothetical liquidation analyses, financial forecasts, estimates and other forward-looking information relating to us reviewed by it, such information reflected the best then-available estimates and judgments of our management and is based on reasonable assumptions. Piper Jaffray expressed no opinion as to any hypothetical liquidation analyses, financial forecasts, estimates or other forward looking information of Transmeta or the assumptions on which they were based. Piper Jaffray did not act as an advisor to us, and did not express an opinion on, any legal, tax, accounting or regulatory matters in any jurisdiction. Piper Jaffray relied, with the consent of our board of directors, on advice of our outside counsel and our independent accountants, and on the assumptions of our management, as to all accounting, legal, tax and financial reporting matters with respect to us and the merger agreement.

 

Piper Jaffray relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the merger agreement and all other related documents and instruments that are referred to therein are true and correct, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the merger will be consummated pursuant to the terms of the merger agreement without amendments thereto, (iv) all conditions to the consummation of the merger will be satisfied without waiver by any party of any conditions or obligations thereunder, (v) the Per Share Merger Consideration will be $18.70 (subject to adjustment as provided in the merger agreement), and (vi) the amount of our unrestricted cash, cash equivalents and short-term investments as of the effective time of the merger will not be lower than $240 million. In arriving at its opinion, Piper Jaffray assumed that all the necessary regulatory approvals and consents required for the merger will be obtained in a manner that will not adversely affect Transmeta or the contemplated benefits of the merger.

 

In arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of Transmeta, or concerning the solvency or fair value of Transmeta and was not furnished with any such appraisals or valuations, nor did Piper Jaffray evaluate the solvency of Transmeta under any state or federal law relating to bankruptcy, insolvency or similar matters. Piper Jaffray did not express any opinion regarding the liquidation value of Transmeta or any other entity. Without limiting the generality of the foregoing, Piper Jaffray has not undertaken any independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Transmeta or any of its affiliates is a party or may be subject, and at our direction and with the consent of our board of directors, Piper Jaffray’s opinion makes no assumption concerning, and therefore does not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Jaffray also assumed that neither Transmeta nor Novafora is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the merger.

 

Piper Jaffray’s opinion was necessarily based upon the information available to Piper Jaffray and facts and circumstances as they existed and were subject to evaluation on the date of the opinion; events occurring after the date of the opinion could materially affect the assumptions used in preparing the opinion. Piper Jaffray did not express any opinion as to the price at which shares of common stock of Transmeta have traded or such stock may trade at any future time. Piper Jaffray has not undertaken to reaffirm or revise the opinion or otherwise comment upon any events occurring after the date of the opinion and does not have any obligation to update, revise or reaffirm the opinion.

 

The opinion addressed solely the fairness, from a financial point of view, to holders of common stock of Transmeta (other than Novafora or its affiliates) of the proposed Per Share Merger Consideration set forth in the merger agreement and did not address any other terms or agreement relating to the merger or any other terms of the merger agreement. Piper Jaffray was not requested to opine as to, and the opinion did not address, the basic business decision to proceed with or effect the merger, the merits of the merger relative to any alternative transaction or business strategy that may be available to Transmeta, including a liquidation, Novafora’s ability to fund the merger consideration, or the fairness of the merger to any other class of securities, creditor or other constituency of Transmeta, including the fairness of the allocation of the consideration among the common stock and the series B preferred stock of Transmeta. Piper Jaffray expressed no opinion with respect to the amount or nature of compensation to any officer, director or employee of any party to the merger, or any class of such persons,

relative to the compensation to be received by holders of our common stock in the merger or with respect to the fairness of any such compensation.

 

Piper Jaffray is a nationally recognized investment banking firm and is regularly engaged as a financial advisor in connection with mergers and acquisitions, underwritings and secondary distributions of securities and private placements. Our board of directors selected Piper Jaffray to render its fairness opinion in connection with the transactions contemplated by the merger agreement on the basis of its experience and reputation in acting as a financial advisor in connection with mergers and acquisitions.

 

Piper Jaffray acted as our financial advisor in connection with the merger and will receive an estimated fee of approximately $2.1 million from us, approximately $1.3 million of which is contingent upon the consummation of the merger. Piper Jaffray received a non-refundable retainer in the amount of $300,000 and a fee of $500,000 from us for providing its opinion, both of which will be credited against the fee for financial advisory services. The opinion fee was not contingent upon the consummation of the merger or the conclusions reached in Piper Jaffray’s opinion. We also agreed to indemnify Piper Jaffray against certain liabilities in connection with its services and to reimburse Piper Jaffray for certain of its expenses. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of Transmeta for their own account or the account of their customers and, accordingly, Piper Jaffray or its affiliates may at any time hold a long or short position in such securities. Piper Jaffray does not currently own any securities of Transmeta for its own account. Piper Jaffray may also, in the future, provide investment banking and financial advisory services to Transmeta, Novafora or entities that are affiliated with the Transmeta or Novafora, for which Piper Jaffray would expect to receive compensation. Piper Jaffray is not currently engaged by Novafora to provide any such services.

 

The consummation of the merger is not subject to a financing contingency, and Novafora has represented and warranted in the merger agreement that it will have sufficient funds, together with the amount of Transmeta’s unrestricted cash, cash equivalents and short-term investments as of the effective time of the merger, to consummate the transactions contemplated by the merger agreement, including payment in full of the amounts payable to our stockholders in the merger.

 

$11.6 million of the aggregate amount payable to Transmeta stockholders in the merger is held in an escrow account and is to be released upon the closing of the merger, all pursuant to the terms and conditions of the Escrow Agreement, dated as of November 14, 2008, by and among Transmeta, Novafora, Intellectual Venture Funding LLC (“Venture Funding”) and Silicon Valley Bank (the “escrow agreement”). A copy of the escrow agreement is attached as Appendix C to this proxy statement.

 

Venture Funding is an affiliate of Intellectual Ventures, a privately-held, invention investment company. Novafora has advised us that it expects to make a transfer of patent rights to an affiliate of Intellectual Ventures following the merger, but we have not been advised of the scope or terms of any such prospective transfer.

 

Under the escrow agreement, Silicon Valley Bank will release the escrow amount to the paying agent in the merger upon the receipt by Silicon Valley Bank of a certification from Venture Funding and confirmation of the consummation of the merger as evidenced by delivery to Silicon Valley Bank of a copy of the certificate of merger with respect to the merger, certified by the Secretary of State of the State of Delaware. Venture Funding is obligated to execute and irrevocably deliver, without conditions, the certification to Silicon Valley Bank if we have satisfied the closing conditions in the merger agreement concerning the accuracy of certain representations and warranties made by us in the merger agreement regarding to intellectual property and our compliance with certain covenants in the merger agreement regarding our activities between November 17, 2008 and the effective time of the merger with respect to intellectual property owned by us and our business lines, properties and assets.

 

In connection with the merger agreement, Novafora entered into voting agreements with all our directors and executive officers. These stockholders hold an aggregate of [          ] shares of our common stock as of the close of business on [          ], 2008, the record date set by our board of directors for the special meeting, which constitute approximately [     ]% of the shares of our common stock outstanding on that date. In addition, in connection with the merger agreement, Novafora entered into voting agreements with entities affiliated with Riley Investment Management LLC and Institutional Venture Partners, which agreements were subsequently terminated at the election of Novafora.

 

Pursuant to the voting agreements, the forms of which are attached hereto as Appendices B-1 (form of voting agreement entered into by Bryant R. Riley), B-2 (form of voting agreement entered into by T. Peter Thomas) and B-3 (form of voting agreement entered into by each of R. Hugh Barnes, Lester M. Crudele, Robert V. Dickinson, Murray A. Goldman, Rick Timmins, J. Michael Gullard, Daniel Hillman, John O’Hara Horsley and Sujan Jain), the parties described above have agreed, among other things, to vote all of their shares of Transmeta common stock:

 

 

In addition, each of these parties has given representatives of Novafora an irrevocable proxy to vote their shares of Transmeta common stock in this manner.

 

The voting agreements prohibit each of the parties described above from transferring any shares of Transmeta common stock at any time prior to the termination of the voting agreement, except that each of those parties will be able to:

 

 

Each of the parties described above also has agreed not to exercise any rights of appraisal or any dissenter’s rights that such party may have (whether under applicable law or otherwise) or could potentially have or acquire in connection with the merger. Those parties also agreed not to, directly or indirectly, grant any proxies or powers of attorney with respect any shares of Transmeta common stock, deposit any shares of Transmeta common stock into a voting trust, enter into a voting agreement (other than the above referenced agreement) or similar arrangement or commitment with respect to any of the party’s shares of Transmeta common stock.

 

Each voting agreement terminates upon the earlier of (i) the consummation of the merger, (ii) the date and time of the termination of the merger agreement in accordance with its terms, (iii) such date and time designated by Novafora in a written notice to the parties described above and (iv) the date and time the merger agreement is amended in any manner adverse to the parties described above.

 

When considering our board of directors’ recommendation that Transmeta stockholders vote in favor of the proposal to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement, Transmeta stockholders should be aware that our directors and executive officers may have interests in the merger that differ from, or which are in addition to, the interests of Transmeta stockholders. These interests create a potential conflict of interest and may be perceived to have affected their decision to support or approve the merger. Our board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the merger and in making its decisions in approving the merger agreement, the merger and the related transactions. These interests include continuation of indemnification rights and coverage under existing or new directors’ and officers’ liability insurance policies, accelerated vesting of stock awards to executive officers and certain directors, and the receipt of severance benefits in the event of certain terminations prior to or upon the consummation of the merger. Transmeta stockholders should be aware of these interests when considering our board of directors’ recommendation to adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement.

Indemnification and Insurance

 

The merger agreement provides that for a period of six years from and after the effective time of the merger, Novafora will cause merger sub, as the surviving entity in the merger, to fulfill and honor the obligations of Transmeta to our present and former directors and officers pursuant to any indemnification and exculpation provisions under our certificate of incorporation or bylaws in effect on November 17, 2008, and pursuant to the terms of any indemnification agreements existing as of November 17, 2008 between us or any of our subsidiaries and our present and former directors and officers with respect to claims arising out of acts or omissions occurring at or prior to the effective time of the merger.

 

The merger agreement also provides that for a period of six years from and after the effective time of the merger, Novafora will cause merger sub, as the surviving entity in the merger, to either maintain in effect our current directors’ and officers’ liability insurance policy with respect to claims arising out of acts or omissions occurring at or prior to the effective time of the merger or purchase a six year extended reporting period endorsement with respect to our current directors’ and officers’ liability insurance policy and maintain such endorsement in full force and effect for its full term.

 

See section entitled “Agreement and Plan of Merger — Indemnification and Insurance” beginning on page 82.

 

Acceleration of Options Granted to our Non-Employee Directors

 

Under our equity incentive plans, the vesting of options to purchase Transmeta common stock granted to our non-employee directors will accelerate in full in connection with the merger. The following table sets forth information with respect to the estimated amount of accelerated vesting of options that each of our non-employee directors would be entitled to receive under our equity incentive plans, assuming a closing date of December 31, 2008 and an estimated per share cash merger consideration amount in the range of $18.70 to $19.00 per share of our common stock: