INCENTIVE RETENTION AGREEMENT
Exhibit 10.32
Transmeta Corporation, a Delaware corporation (the “Company”), and Xxxx X’Xxxx Xxxxxxx
(“Employee”) have entered into this Incentive Retention Agreement (this
“Agreement”), dated as of February 27, 2007 (the “Effective Date”), on the basis of
the following facts:
R E C I T A L S
WHEREAS, the Company has filed on October 11, 2006 (the “Filing Date”) a lawsuit against Intel
Corporation (“Intel”) in the United States District Court for the District of Delaware for
infringement of ten of the Company’s U.S. patents covering computer architecture and power
efficiency technologies. That action, including any additional claims and counterclaims asserted
therein or in any related case or action between Transmeta and Intel, is referred to herein as the
“Lawsuit”. For purposes of this Agreement, the “Company” means the Company or the
successor-in-interest, if any, to materially all of the Company’s rights in the Lawsuit.
WHEREAS, Employee has substantial knowledge regarding the claims and matters at issue in the
Lawsuit as well as substantial professional expertise in the litigation of complex patent and
intellectual property claims such as those at issue in the Lawsuit.
WHEREAS, in lieu of hiring legal counsel to manage the Lawsuit on a contingency basis, the
Company wishes to provide Employee incentives to continue to manage the Lawsuit on behalf of the
Company to a final determination or resolution.
WHEREAS, it is typical to pay legal counsel, hired on a contingency basis, approximately 25%
to 40% of the amount of the judgment received by the legal counsel’s client in the related lawsuit.
Accordingly, the Potential Incentive Amount (defined below) payable to Employee is calculated
based on 25% of the net cash value received by the Company resulting from the Lawsuit, less out of
pocket costs and attorneys’ fees paid by the Company respecting the Lawsuit. The resulting amount
(the “Savings”) is then divided by four to derive the Potential Incentive Amount, as more fully
described below.
WHEREAS, the Company and Employee desire to enter into this Agreement in consideration of
Employee’s continued employment with the Company upon the terms and conditions hereinafter
provided.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
(a) “Potential Incentive Amount” means the difference of (A) one-fourth of the Savings
minus (B) the Advance Payments. If the calculation of the Potential Incentive Amount results in a
negative number, then the Potential Incentive Amount equals zero.
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(b) “Cause” means: (i) a good faith determination by the Board of Directors of the
Company or the Company’s chief executive officer that Employee willfully failed to follow the
lawful written directions of the Board of Directors or the Company’s chief executive officer to the
material detriment of the Company; or (ii) engagement in gross misconduct that is materially
detrimental to the Company; or (iii) willful and repeated failure or refusal to comply in any
material respect with the Company’s proprietary information, inventions assignment and
confidentiality agreement, or any other policies of the Company applicable to Employee where
non-compliance would be materially detrimental to the Company, including the Company’s xxxxxxx
xxxxxxx policy; or (iv) conviction of, or plea of guilty to, a felony that the Company’s Board of
Directors or chief executive officer reasonably believes would reflect adversely on the Company.
(c) “Company Amount” means the sum of the present value (using a discount rate equal
to the lesser of the Company’s cost of capital on the Determination Date and 8%) on the
Determination Date of either (i) each payment made, or to be made, in cash to the Company by Intel
and its affiliates as a direct result of the final, non-appealable judgment resolving all claims
and counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into a settlement
resolving all claims and counterclaims made in the Lawsuit, then the amount paid to the Company by
Intel and its affiliates in cash pursuant to that settlement.
(d) “Determination Date” means the date of the final, non-appealable judgment
resolving all claims and counterclaims in the Lawsuit or, if the Company and Intel instead enter
into a settlement resolving all claims and counterclaims made in the Lawsuit, then the effective
date of that settlement.
(e) “Disability” means that Employee has been unable to perform with reasonable accommodation
his duties under this Agreement as the result of his incapacity due to physical or mental illness,
and such inability, at least 16 weeks after its commencement, is determined to be permanent by a
physician selected by the Company or its insurers and acceptable to Employee and his legal
representative, such agreement as to acceptability not to be unreasonably withheld.
(f) “Good
Reason” means the occurrence of any of the following conditions without Employee’s
informed written consent, which condition remains in effect ten (10) days after written notice to
the Company from Employee of such condition: (a) a significant diminution by the Company in
Employee’s authority or duties in managing the Lawsuit on behalf of the Company, or (b) a material
reduction in Employee’s regular base salary (except in connection with a comparable reduction in
salary applicable to all executive-level employees of the Company), or (c) the Company’s requiring
Employee to be based at any office or location more than fifty (50) miles from the Company’s
current offices, other than on a temporary professional basis for purposes of the trial or any
other litigation-related proceedings in the Lawsuit, or (d) any material breach by the Company of
the terms of this Agreement, including but not limited to the failure by the Company to require a
successor-in-interest to the Company’s rights in the Lawsuit (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to assume expressly and agree to perform the
Company’s obligations under this Agreement, as if no such succession had taken place.
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(g) “Intel Amount” means the sum of the present value (using a discount rate equal to
the lesser of the Company’s cost of capital on the Determination Date (as defined above) and 8%) on
the Determination Date of either (i) each payment made, or to be made, in cash to Intel and its
affiliates by the Company as a direct result of the final, non-appealable judgment resolving all
claims and counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into a
settlement resolving all claims and counterclaims made in the Lawsuit, then the amount paid to
Intel and its affiliates by the Company in cash value pursuant to that settlement.
(h) “Litigation Costs” means the sum of all out of pocket costs and expenses
(including all attorneys’ fees) incurred by the Company in connection with the Lawsuit (including
any settlement thereof) and ultimately paid by the Company.
(i) “Net Amount” means the Company Amount minus the Intel Amount.
(j) “Savings” means the difference of (A) 25% of the Net Amount minus (B) the
Litigation Costs.
2. Payment.
(a) On entry of the final, non-appealable judgment resolving all claims and counterclaims in
the Lawsuit or, if the Company and Intel instead enter a settlement resolving all claims and
counterclaims made in the Lawsuit and that settlement requires only the payment of cash or cash
equivalents by the parties to the Lawsuit, then the Company shall pay to Employee a bonus as
follows:
(i) If Employee is employed by the Company on the Determination Date, and has been
continuously employed by the Company on that date since the Effective Date, then the Company shall
pay to Employee, within 60 calendar days following the Determination Date, an amount in cash equal
to the Potential Incentive Amount.
(ii) If the Company terminates Employee’s employment without Cause prior to the Determination
Date (such date of termination referred to as the “Termination Date”), then the Company
shall pay to Employee, within 60 calendar days following the Determination Date, an amount in cash
equal to the greater of either: (1) the product of (A) the Potential Incentive Amount multiplied by
(B) the number of days from (and including) the Filing Date to (and including) the Termination Date
divided by the number of days from (and including) the Filing Date to (and including) the
Determination Date, or (2) in the event that the Termination Date occurs after judgment has been
entered in the Lawsuit but before the Determination Date, and to the extent that the final
non-appealable judgment resolving all claims and counterclaims in the Lawsuit substantially
reflects an affirmance of that judgment through regular appellate review, then the Potential
Incentive Amount.
(iii) If Employee resigns as an employee of the Company without Good Reason prior to the
Determination Date, then the Company will not be obligated to pay to Employee any portion of the
Potential Incentive Amount.
(iv) If Employee resigns as an employee of the Company with Good Reason prior to the
Determination Date, then the Company will pay to Employee, within 60 calendar
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days following the Determination Date, an amount in cash determined in accordance with the
same measure set out above in Section 2(a)(ii).
(v) If Employee’s employment is terminated prior to the Determination Date by reason of his
death or Disability, then the Board of Directors of the Company will have discretion to decide what
portion of the Potential Incentive Amount, if any, shall be payable to Employee or his heirs or
successors, based on a good faith assessment of Employee’s contribution to the litigation of the
Lawsuit up to the Termination Date, and consistent with the intent reflected in this Section 2(a)
and below in Section 11.
(b) If the final, non-appealable judgment resolving all claims and counterclaims in the
Lawsuit or, if the Company and Intel instead enter a settlement resolving all claims and
counterclaims in the Lawsuit and that settlement involves consideration other than cash or cash
equivalents, then the Company shall pay to Employee a bonus, in an amount and on such date as
determined by the Company’s Board of Directors in good faith, consistent with the intent reflected
in Section 2(a) above.
(c) Unless in contravention of any express terms of this Agreement, any determination made by
the Company’s Board of Directors respecting the interpretation or meaning of any provision of
Sections 1 or 2 will be made in its sole discretion. Any such determination will be final and
binding on the Company and Employee.
3. Advance Payments. If Employee is employed by the Company on December 31, 2007,
and, on that date, has been continuously employed by the Company since the Effective Date, then the
Company will pay, within five days following December 31, 2007, to Employee an amount equal to
$250,000. The Company shall not be obligated to make that payment if the Determination Date occurs
prior to December 31, 2007. In addition, on each successive yearly anniversary date of December
31, 2007 that Employee is employed by the Company, and, on that date, has been continuously
employed by the Company since the Effective Date, then the Company will pay, within five days
following that date, to Employee an amount equal to $250,000; provided, that the Company shall not
be obligated to make such payment if the Determination Date occurs prior to that date. The
aggregate of the $250,000 payments actually paid to Employee pursuant to this Section 3, without
regard to withholdings made in accordance with Section 5, are referred to herein as the
“Advance Payments.” For avoidance of doubt, any Advance Payment to Employee under this
Agreement is in addition to Employee’s regular salary as an employee of the Company, and the
Company has no right of return or refund from Employee relating to any Advance Payment made under
this Agreement. Advance Payments are intended and expected to be the fundamental element of
Employee’s annual target bonus compensation during the pendency of the Lawsuit, and the Board of
Directors of the Company will determine from time to time, in good faith and in its sole discretion
consistent with the applicable compensation policies of the Company, the extent to which Employee
may also be eligible to continue to participate in the Company’s regular management incentive bonus
program based upon his other management contributions to the Company during the pendency of the
Lawsuit.
4. No Service or Employment Contract; No Delegation by the Board. This Agreement does
not confer upon Employee any right with respect to continuance of employment
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by or service with the Company, nor does it interfere in any way with the right of the Company
to terminate Employee’s employment by or service with the Company at any time for any reason.
Further, this Agreement does not diminish the authority of the Company’s Board of Directors to
determine and approve any and all actions of the Company respecting the Lawsuit, nor delegate to
Employee any such authority of the Company’s Board of Directors.
5. Withholding. The Company is authorized to withhold from any benefit provided or
payment due hereunder the amount of withholding taxes due under any federal, state or local
authority in respect of such benefit or payment and to take such action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such withholding taxes.
6. Governing Law. This Agreement shall be governed and construed in accordance with
the laws of the State of California without regard to its conflict of laws provisions. The parties
agree that any action or proceeding with respect to this Agreement shall be brought in the courts
located in Santa Xxxxx County, California, and the parties agree to the jurisdiction thereof. The
parties hereby irrevocably waive any objection they may now or hereafter have to the laying of
venue of any such action in the said court(s), and further irrevocably waive any claim they may now
or hereafter have that any such action brought in said court(s) has been brought in an inconvenient
forum.
7. Validity and Construction. This Agreement has been fully negotiated by the
Company, Employee and their respective independent legal counsel. The Company understands that the
Potential Incentive Amount and the Advance Payments in this Agreement are not set by law but rather
are fully negotiable between the Company and the Employee. This Agreement will be interpreted
fairly in accordance with its terms and without any strict construction in favor of or against
either the Company or Employee. The provisions of this Agreement are severable. If any provision
of this Agreement is determined by a court of law to be invalid or unenforceable, then such
provision will be enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable. In such contingency, the Company and Employee will also negotiate
in good faith, if necessary, a valid and enforceable substitute provision or agreement that most
nearly effects the intent of the Company and Employee in entering into this Agreement.
8. Amendment; Waivers. This Agreement may not be modified, altered or changed except
upon the express written consent of both parties wherein specific reference is made to this
Agreement. No delay on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
9. Entire Agreement. This Agreement sets forth the entire agreement between the
parties hereto, and fully supersedes any prior agreements or understandings between the parties.
Notwithstanding the foregoing, however, the payments contemplated by this Agreement are in addition
to, and not in lieu of, compensation arrangements set forth in other agreements or understandings
between the parties that do not relate to the subject matter hereof, including without limitation
the Company’s Retention and Severance Plan.
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10. Headings. Section headings are used herein for convenience or reference only and
shall not affect the meaning of any provision of this Agreement.
11. Successors. This Agreement shall inure to the benefit of and shall be binding
upon the Company and its successors and assigns. The rights and obligations of Employee under this
Agreement are personal in nature and shall neither be transferred nor assigned in whole or in part
by Employee. Subject to the restrictions on transfer set forth in the preceding sentence of this
Section 11, in the event of Employee’s death, the rights of Employee under this Agreement shall
inure to the benefit of and shall be binding on Employee’s heirs, executors, administrators, legal
representatives, successors and assigns.
12. Counterparts. This Agreement may be executed in two counterparts, each of which
shall be deemed an original but both of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement, as of the date first written
above.
| COMPANY: Transmeta Corporation |
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| By: | /s/ XXXXXX X. XXXXXXX | |||
| Name: | Xxxxxx X. Xxxxxxx | |||
| Title: | President & Chief Executive Officer | |||
| EMPLOYEE: Xxxx X’Xxxx Xxxxxxx |
||||
| /s/ XXXX X’XXXX XXXXXXX | ||||
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