<PAGE> 1
EXHIBIT 1.01
WSGR DRAFT 10/8/00
_______________ Shares
TRANSMETA CORPORATION
COMMON STOCK $0.00001 PAR VALUE
UNDERWRITING AGREEMENT
__________, 2000
<PAGE> 2
______, 2000
Morgan Stanley & Co. Incorporated
Deutsche Bank Securities Inc.
Salomon Smith Barney Inc.
Banc of America Securities LLC
SG Cowen Securities Corporation
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Transmeta Corporation, a Delaware corporation (the "COMPANY"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") _______________ shares of its Common Stock, $0.00001 par value
(the "FIRM SHARES"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional ______________ shares of its Common
Stock, $0.00001 par value (the "ADDITIONAL SHARES") if and to the extent that
you, as Managers of the offering, shall have determined to exercise, on behalf
of the Underwriters, the right to purchase such shares of common stock granted
to the Underwriters in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES." The shares of
Common Stock, $0.00001 par value, of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") has agreed to
reserve a portion of the Shares to be purchased by it under this Agreement for
sale to the Company's directors, officers, employees and business associates and
other parties related to the Company (collectively, "PARTICIPANTS"), as set
forth in the Prospectus under the heading "Underwriters" (the "DIRECTED SHARE
PROGRAM"). The Shares to be sold by Morgan Stanley and its affiliates, if any,
pursuant to the Directed Share Program are referred to hereinafter as the
"DIRECTED SHARES." Any Directed Shares not confirmed for purchase by any
Participants by the end of the business day following the
<PAGE> 3
day on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
1. Representations and Warranties. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) Based on advice from the Commission, the Registration
Statement has become effective; no stop order suspending the effectiveness of
the Registration Statement is in effect, and, to the knowledge of the Company,
no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and corporate authority to own its
property and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole. The execution and delivery of
the Agreement and Plan of Merger dated as of ________, 2000 (the "Merger
Agreement") between Transmeta Corporation, a California corporation (the
"California Corporation"), and the Company, effecting the reincorporation of the
California Corporation under the laws of the State of Delaware, was duly
authorized by all necessary corporate action on the part of each of the
California Corporation and the Company. Each of the California Corporation and
the Company had all corporate power and authority to execute and deliver the
Merger Agreement, to file the Merger Agreement with the Secretary of State of
California and the Secretary of State of Delaware and to consummate the
reincorporation contemplated by the Merger Agreement. The Merger Agreement at
the time of execution and filing constituted a binding obligation of each of the
California Corporation and the Company, enforceable in accordance with its
terms, and the reincorporation contemplated by the Merger Agreement has been
consummated in accordance with its terms.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and corporate
authority to own its property and to conduct its business and is
-2-
<PAGE> 4
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned directly
by the Company, free and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) Upon the filing of the Second Amended and Restated
Certificate of Incorporation filed as Exhibit 3.0 to the Registration Statement,
the authorized capital stock of the Company conforms as to legal matters to the
description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance
of the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or governmental agency is required for
the performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various states
or foreign jurisdictions or the bylaws and rules and regulations of the NASD in
connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or, to
the Company's knowledge, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or any
of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the
-3-
<PAGE> 5
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be required to register as an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the Company
to file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement, except such
as have been disclosed in the Prospectus and have been duly waived.
(q) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (1) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital
-4-
<PAGE> 6
stock other than ordinary and customary dividends; and (3) there has not been
any material change in the capital stock, short-term debt or long-term debt of
the Company and its subsidiaries, except in each case as described in the
Prospectus.
(s) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, taken as a whole, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each case except
as described in the Prospectus.
(t) The Company and its subsidiaries own or possess or can
acquire on reasonable terms all material patents, patent rights, licenses,
inventions, copyrights, trademarks, service marks and trade names, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar intellectual
property rights, necessary to carry on their business in all material respects
as described in the Prospectus and currently employed by them in connection with
the business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse affect on the Company and its subsidiaries, taken
as a whole.
(u) No material labor dispute with the employees of the Company
or any of its subsidiaries exists, except as described in the Prospectus, or, to
the knowledge of the Company, is imminent; and, without conducting any
independent investigation, the Company is not aware of any existing, threatened
or imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(v) The Company and its subsidiaries are insured by the insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any of its subsidiaries has been refused any
insurance coverage sought or applied for; and neither the Company nor any of its
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, except as described in the Prospectus.
(w) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization
-5-
<PAGE> 7
or permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the Company
and its subsidiaries, taken as a whole, except as described the Prospectus
(x) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) Ernst & Young LLP are independent public accountants with
respect to the Company and its subsidiaries as required by the Securities Act.
(z) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program.
(aa) No consent, approval, authorization or order of, or
qualification with, any governmental body or governmental agency, other than
those obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(bb) The Company has not offered, or caused Morgan Stanley or its
affiliates to offer, Shares to any person pursuant to the Directed Share Program
with the specific intent to unlawfully influence (i) a customer or supplier of
the Company to alter the customer's or supplier's level or type of business with
the Company, or (ii) a trade journalist or publication to write or publish
favorable information about the Company or its products.
(cc) Except for the Shares, all outstanding shares of Common
Stock, and all securities convertible into or exercisable or exchangeable for
Common Stock, are subject to valid and binding agreements (collectively, the
"LOCK-UP AGREEMENTS") that restrict the holders thereof from offering, pledging,
selling, contracting to sell, selling any option or contract to purchase,
purchasing any option or contract to sell, granting any option, right or warrant
to purchase, lending, or otherwise transferring or disposing of, directly or
indirectly, any of such shares of Common Stock, or any such securities
convertible into or exercisable or exchangeable for Common Stock, or entering
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Common Stock, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated or the Company.
-6-
<PAGE> 8
(dd) The Company (i) has notified each holder of a currently
outstanding option who has not signed a Lock-up Agreement issued under its
incentive stock plans (the "OPTION PLANS") as well as non-plan grants and each
person who has acquired shares of Common Stock pursuant to the exercise of any
option granted under the Option Plans who has not signed a Lock-up Agreement
that pursuant to the terms of the Option Plans, that none of such options or
shares may be sold or otherwise transferred or disposed of for a period of 180
days after the date of the Prospectus and (ii) has imposed a stop-transfer
instruction with the Company's transfer agent in order to enforce the foregoing
lock-up provision imposed pursuant to the Option Plans.
(ee) The Company (i) has notified certain shareholders who have
not signed Lock-up Agreements who are parties to the Fifth Restated Investors'
Rights Agreement dated March 31, 2000 (the "REGISTRATION RIGHTS AGREEMENT"),
that pursuant to the terms of the Registration Rights Agreement, none of their
shares of the Company's capital stock held by such shareholders may be sold or
otherwise transferred or disposed of for a period of 180 days after the date of
the Prospectus and (ii) has imposed a stop-transfer instruction with the
Company's transfer agent in order to enforce the 180 day lock-up provision
imposed pursuant to the Registration Rights Agreement with respect to each
shareholder subject to the Registration Rights Agreement.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or
-7-
<PAGE> 9
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder or (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Underwriters have been advised in writing, or which is described in
the Prospectus or (C) the grant of options or the issuance of shares of Common
Stock to employees, officers, directors, advisors or consultants pursuant to
employee benefit plans described in the prospectus.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ________, 2000, or at such
other time on the same or such other date, not later than _______, 2000 as shall
be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than _______, 2000, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 5:00 p.m. (New York City time) on the date hereof.
-8-
<PAGE> 10
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed on behalf of the Company by an
executive officer of the Company, to the effect set forth in Section 5(a)(i)
above and to the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date and that
the Company has complied in all material respects with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Fenwick & West LLP ("FENWICK & WEST"), outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and corporate authority to own
its property and to conduct its business as it is currently being conducted as
described in the Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole;
(ii) Transmeta International Corporation, a Delaware
corporation and a subsidiary of the Company (the "Delaware Subsidiary"), has
been duly incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, and has the corporate
power and corporate authority to own its property and to conduct its business
as it is currently being conducted as described in the Prospectus;
-9-
<PAGE> 11
(iii) the execution and delivery of the Merger
Agreement, effecting the reincorporation of the California Corporation into the
State of Delaware pursuant to the laws of the State of California and the State
of State of Delaware, was duly authorized by all necessary corporate action on
the part of each of the California Corporation and the Company;
(iv) each of the California Corporation and the Company
had all corporate power and corporate authority to execute and deliver the
Merger Agreement, to file the Merger Agreement with the Secretary of State of
California and the Secretary of State of Delaware and to consummate the
reincorporation contemplated by the Merger Agreement; the Merger Agreement at
the time of execution and filing constituted a valid and binding obligation of
each of the California Corporation and the Company, and the reincorporation
contemplated by the Merger Agreement has been consummated in accordance with
its terms;
(v) the authorized capital stock of the Company conforms
as to legal matters in all material respects to the description thereof
contained in the Prospectus under the caption "Description of Capital Stock;"
(vi) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and validly issued and are
non-assessable and, to such counsel's knowledge, are fully paid;
(vii) all of the issued shares of capital stock of the
Delaware Subsidiary have been duly authorized and validly issued and are
non-assessable and, to such counsel's knowledge, are fully paid and, based
solely on the review of stock records provided to such counsel, are owned
directly by the Company, free and clear of all liens, encumbrances, equities or
claims;
(viii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights contained in the
Company's certificate of incorporation or bylaws, under the Delaware General
Corporation Law or under agreements filed as Exhibits to the Registration
Statement or listed on a schedule to such counsel's opinion, except such as
have been duly waived;
(ix) this Agreement has been duly authorized, executed
and delivered by the Company;
(x) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement filed as an Exhibit to
the Registration Statement or listed on a schedule to such counsel's opinion,
or, to such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or the
Delaware Subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or governmental agency is required
for the performance by the Company of its obligations under this Agreement,
except such as may be required by the securities or Blue Sky laws of the
various states or the bylaws and rules
-10-
<PAGE> 12
and regulations of the NASD (as to which such counsel expresses no opinion) in
connection with the offer and sale of the Shares;
(xi) the statements (A) in the Prospectus under the
captions "Risk Factors - Our products may infringe the intellectual property
rights of others, which may cause us to become subject to expensive litigation,
cause us to incur substantial damages, require us to pay significant license
fees or prevent us from selling our products" and - "Others may infringe our
intellectual property rights, which may cause us to expend significant
resources to enforce our rights or suffer competitive injury," "Business -
Transmeta's Solution" and - "Intellectual Property," "Related Party
Transactions," "Shares Eligible for Future Sale," "Description of Capital
Stock" and "Underwriters" and (B) in the Registration Statement in Items 14 and
15, in each case insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly present in all
material respects the information called for with respect to such legal
matters, documents and proceedings and fairly summarize in all material
respects the matters referred to therein;
(xii) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or its
Delaware Subsidiary is a party or to which any of the properties of the Company
or its Delaware Subsidiary is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or of any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;
(xiii) the Company is not and, after giving effect to
the offering and sale of the Shares and the application of the proceeds
therefrom as described in the Prospectus, will not be required to register as
an "investment company" as such term is defined in the Investment Company Act
of 1940, as amended;
(xiv) (A) the Registration Statement and Prospectus
(except for financial statements and notes thereto and schedules included
therein and financial and statistical data derived therefrom as to which such
counsel need not express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and regulations of
the Commission thereunder, (B) no facts have come to such counsel's attention
that have caused it to believe that (except for financial statements and notes
thereto and schedules included therein and other financial and statistical data
derived therefrom as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (C) no facts
have come to such counsel's attention that have caused it to believe that
(except for financial statements and notes thereto and schedules included
therein and other financial and statistical data derived therefrom as to which
such counsel need not express any belief) the Prospectus contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
-11-
<PAGE> 13
(xv) The Company or its predecessor corporation,
Transmeta Corporation, a California corporation, is listed in the records of
the U.S. Patent and Trademark Office (the "PTO") as the holder of record of
each of the patents listed on Schedule 1 of such opinion and each of the
applications listed by application number on Schedule 2 of such opinion, and
the Company or its predecessor has caused to be filed applications listed by
application number in the name of the Company or its predecessor in the foreign
offices listed on Schedule 3 of such opinion. To such counsel's knowledge,
there is no pending or overtly threatened claim of any third party to any
ownership interests in any of the patents listed on Schedule 1 or the patent
applications listed on Schedule 2 or 3. To such counsel's knowledge, after a
review of the Company's files and the file history provided by the Company to
such counsel of each of the patents and applications, there is no material
defect in form of the patents listed on Schedule 1 and patent applications
listed on Schedule 2 of such opinion.
(xvi) The Company's Agreement for Purchase and Sale of
Custom Semiconductor Products with International Business Machines Corporation
(the "IBM Agreement") filed as Exhibit 10.07 to the Registration Statement
constitutes the valid and binding obligation of the Company, and such counsel
is not aware of any claim made by any party with respect to the Company's right
to enforce any provision of the IBM Agreement;
(xvii) Except as otherwise set forth in the Prospectus,
such counsel is not aware of any legal actions, claims or proceedings pending
or overtly threatened against the Company, its manufacturers, suppliers or
customers alleging that the Company is infringing or otherwise violating any
patents, trademarks, trademark registrations, service marks or service mark
registrations, trade names, copyrights, licenses, inventions or trade secrets
owned by others.
(d) The Underwriters shall have received on the Closing Date an
opinion of _______, counsel to the Company's subsidiary Transmeta World Inc., a
corporation incorporated under the laws of the Cayman Islands, dated the Closing
Date, to the effect that:
(i) The subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the Cayman
Islands.
(ii) The subsidiary has corporate power and authority to
own, lease and operate its properties and to conduct its business as [currently
conducted][described in the Prospectus], and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iii) The authorized, issued and outstanding capital
stock of the subsidiary is _________ shares of Common Stock; all of the shares
of issued and outstanding capital stock of the subsidiary have been duly
authorized and are validly issued and non-assessable and are fully paid and are
held of record and beneficially owned by the Company; and, to such counsel's
knowledge, are free and clear of all liens, encumbrances, equities or claims;
-12-
<PAGE> 14
(iv) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the charter or bylaws of the
subsidiary or, to such counsel's knowledge, any agreement or other instrument
binding upon the subsidiary that is material to the Company and its
subsidiaries, taken as a whole, or, to such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the subsidiary; and
(v) To such counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which the subsidiary
is a party or to which any properties of the subsidiary are subject that are
required to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed.
(e) The Underwriters shall have received on the Closing Date an
opinion of _______, counsel to the Company's subsidiary Transmeta Singapore PTE
LTD, a corporation incorporated under the laws of Singapore, dated the Closing
Date, to the effect that:
(i) The subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of Singapore.
(ii) The subsidiary has corporate power and authority to
own, lease and operate its properties and to conduct its business as [currently
conducted][described in the Prospectus], and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iii) The authorized, issued and outstanding capital
stock of the subsidiary is _________ shares of Common Stock; all of the shares
of issued and outstanding capital stock of the subsidiary have been duly
authorized and are validly issued and non-assessable and are fully paid and are
held of record and beneficially owned by the Company; and, to such counsel's
knowledge, are free and clear of all liens, encumbrances, equities or claims;
(iv) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the charter or bylaws of the
subsidiary or, to such counsel's knowledge, any agreement or other instrument
binding upon the subsidiary that is material to the Company and its
subsidiaries, taken as a whole, or, to such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the subsidiary; and
(v) To such counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which the subsidiary
is a party or to which any properties of the subsidiary are subject that are
required to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or
-13-
<PAGE> 15
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed.
(f) The Underwriters shall have received on the Closing Date an
opinion of _______, counsel to the Company's subsidiary Transmeta Taiwan, a
corporation incorporated under the laws of Taiwan, dated the Closing Date, to
the effect that:
(i) The subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of Singapore.
(ii) The subsidiary has corporate power and authority to
own, lease and operate its properties and to conduct its business as [currently
conducted][described in the Prospectus], and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iii) The authorized, issued and outstanding capital
stock of the subsidiary is _________ shares of Common Stock; all of the shares
of issued and outstanding capital stock of the subsidiary have been duly
authorized and are validly issued and non-assessable and are fully paid and are
held of record and beneficially owned by the Company; and, to such counsel's
knowledge, are free and clear of all liens, encumbrances, equities or claims;
(iv) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the charter or bylaws of the
subsidiary or, to such counsel's knowledge, any agreement or other instrument
binding upon the subsidiary that is material to the Company and its
subsidiaries, taken as a whole, or, to such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the subsidiary; and
(v) To such counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which the subsidiary
is a party or to which any properties of the subsidiary are subject that are
required to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed.
(g) The Underwriters shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati Professional Corporation ("WILSON
SONSINI GOODRICH & ROSATI"), counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 5(c)(viii), 5(c)(vix),
5(c)(xi) (but only as to the statements in the Prospectus under "Description of
Capital Stock" and "Underwriters") and 5(c)(xv) above.
With respect to Section 5(c)(xv) above, Fenwick & West and Wilson
Sonsini Goodrich & Rosati may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review
-14-
<PAGE> 16
and discussion of the contents thereof, but are without independent check or
verification, except as specified.
The opinion of Fenwick & West described in Section 5(c) above shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.
(h) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters, from
Ernst & Young LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus; provided
that the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(i) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and the officers, directors who hold securities of
the Company and certain stockholders, option holders and warrant holders of the
Company relating to sales and certain other dispositions of shares of Common
Stock or certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, 6 signed copies of the
Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to use its best efforts to furnish to you in New York
City, without charge, prior to 6:00 p.m. New York City time on the business day
next succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order to make the
statements
-15-
<PAGE> 17
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement covering the twelve-month
period ending [December 31, 2001], that satisfies the provisions of Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel and the Company's accountants in connection with the registration and
delivery of the Shares under the Securities Act and all other fees or expenses
in connection with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky memorandum in connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the qualification of the
Shares for offer and sale under state securities laws as provided in Section
6(d) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all reasonable fees and expenses in
connection with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to listing
the Shares on the Nasdaq National Market, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
-16-
<PAGE> 18
show (ix) all reasonable fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and stamp duties,
similar taxes or duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program and (x) all other costs and expenses
incident to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section. It is understood,
however, that except as provided in subsections (iii), (iv) and (ix) of this
Section, Section 7 entitled "Indemnity and Contribution," and the last paragraph
of Section 10 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Shares by them and any advertising expenses connected
with any offers they may make.
(g) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation, Inc.
under its Interpretative Material 2110-1 on free-riding and withholding to the
extent necessary to ensure compliance with the three month restrictions. Morgan
Stanley will notify the Company as to which Participants need to be so
restricted.
(h) To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed Shares
are offered in connection with the Directed Share Program.
7. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
or on behalf of such Underwriter through you expressly for use therein.
(a) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by or on behalf of such
Underwriter through you expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements thereto.
-17-
<PAGE> 19
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the
-18-
<PAGE> 20
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other hand in connection with the offering of the Shares shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the Company
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective number of Shares they have purchased hereunder, and not joint.
(d) The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. Directed Share Program Indemnification. (a) The Company agrees to
indemnify and hold harmless Morgan Stanley and its affiliates and each person,
if any, who controls Morgan Stanley or its affiliates within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("MORGAN STANLEY ENTITIES"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably
-19-
<PAGE> 21
incurred in connection with defending or investigating any such action or claim)
(i) caused by any untrue statement or alleged untrue statement of a material
fact contained in any material prepared by or with the consent of the Company
for distribution to Participants in connection with the Directed Share Program,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (ii) caused by the failure of any Participant to pay for and accept
delivery of Directed Shares that the Participant has agreed to purchase; or
(iii) related to, arising out of, or in connection with the Directed Share
Program other than losses, claims, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Morgan Stanley Entity in
respect of which indemnity may be sought pursuant to Section 8(a), the Morgan
Stanley Entity seeking indemnity shall promptly notify the Company in writing
and the Company, upon request of the Morgan Stanley Entity, shall retain counsel
reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan
Stanley Entity and any other indemnified party that the Company may designate in
such proceeding and shall pay the fees and disbursements of such counsel related
to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Morgan Stanley Entity unless (I) the Company
shall have agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the Company
and the Morgan Stanley Entity and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. The Company shall not, in respect of the legal expenses of the
Morgan Stanley Entities in connection with any proceeding or related proceedings
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Morgan Stanley
Entities. Any such firm for the Morgan Stanley Entities shall be designated in
writing by Morgan Stanley. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Company agrees to
indemnify the Morgan Stanley Entities from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time a Morgan Stanley Entity shall have requested the Company to
reimburse it for fees and expenses of counsel as contemplated by the second and
third sentences of this paragraph, the Company agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by the Company
of the aforesaid request and (ii) the Company shall not have reimbursed the
Morgan Stanley Entity in accordance with such request prior to the date of such
settlement. The Company shall not, without the prior written consent of Morgan
Stanley, effect any settlement of any pending or threatened proceeding in
respect of which any Morgan Stanley Entity is or could have been a party and
indemnity could have been sought hereunder by such Morgan Stanley Entity, unless
such settlement includes an unconditional release of the Morgan Stanley Entities
from all liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section
8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any
losses, claims, damages or liabilities
-20-
<PAGE> 22
referred to therein, then the Company, in lieu of indemnifying the Morgan
Stanley Entity thereunder, shall contribute to the amount paid or payable by the
Morgan Stanley Entity as a result of such losses, claims, damages or liabilities
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Morgan Stanley Entities on the
other hand from the offering of the Directed Shares or (ii) if the allocation
provided by clause 8(c)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(c)(i) above but also the relative fault of the Company on the one
hand and of the Morgan Stanley Entities on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and of the Morgan
Stanley Entities on the other hand in connection with the offering of the
Directed Shares shall be deemed to be in the same respective proportions as the
net proceeds from the offering of the Directed Shares (before deducting
expenses) and the total underwriting discounts and commissions received by the
Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public
Offering Price of the Shares. If the loss, claim, damage or liability is caused
by an untrue or alleged untrue statement of a material fact, the relative fault
of the Company on the one hand and the Morgan Stanley Entities on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement or the omission or alleged omission relates to
information supplied by the Company or by the Morgan Stanley Entities and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it
would not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Morgan Stanley Entities were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 8(c). The amount paid or payable by the Morgan Stanley Entities as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the Morgan Stanley Entities in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 8, no
Morgan Stanley Entity shall be required to contribute any amount in excess of
the amount by which the total price at which the Directed Shares distributed to
the public were offered to the public exceeds the amount of any damages that
such Morgan Stanley Entity has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. The remedies
provided for in this Section 8 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any Morgan Stanley Entity at law
or in equity.
(e) The indemnity and contribution provisions contained in this
Section 8 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Morgan Stanley Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed Shares.
-21-
<PAGE> 23
9. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
number of Shares without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
-22-
<PAGE> 24
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
-23-
<PAGE> 25
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
TRANSMETA CORPORATION
By:
--------------------------------
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Deutsche Bank Securities Inc.
Salomon Smith Barney Inc.
Banc of America Securities LLC
SG Cowen Securities Corporation
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
--------------------------------
Name:
Title:
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
FIRM SHARES TO
UNDERWRITER BE PURCHASED
-------------------------------------------------- ----------------
<S> <C>
Morgan Stanley & Co. Incorporated
Deutsche Bank Securities Inc.
Salomon Smith Barney Inc.
Banc of America Securities LLC
SG Cowen Securities Corporation
-------------
Total
=============
</TABLE>
<PAGE> 27
EXHIBIT A
[FORM OF LOCK UP AGREEMENT]
