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EXHIBIT 99.01
DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately following the closing of this offering, our authorized capital
stock will consist of 1,000,000,000 shares of common stock, $.00001 par value
per share, and 5,000,000 shares of undesignated preferred stock, $.00001 par
value per share. As of September 30, 2000, we had outstanding 114,752,858 shares
of common stock, assuming the conversion of all outstanding preferred stock into
common stock and the conversion of a convertible promissory note into 1,200,000
shares of common stock, which will occur upon the closing of this offering. As
of September 30, 2000, we had approximately 374 shareholders.
COMMON STOCK
DIVIDEND RIGHTS
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to received dividends out of assets legally available at the times and
in the amounts that our board may determine from time to time.
VOTING RIGHTS
Each holder of common stock is entitled to one vote for each share of
common stock held on all matters submitted to a vote of stockholders. We have
not provided for cumulative voting for the election of directors in our
certificate of incorporation. This means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. In
addition, our certificate of incorporation and bylaws require the approval of
two-thirds, rather than a majority, of the shares entitled to vote for some
matters. For a description of these matters, see "-- Anti-Takeover Effects of
Delaware Law and our Certificate of Incorporation and Bylaws" below.
NO PREEMPTIVE, CONVERSION OR REDEMPTION RIGHTS
Our common stock is not entitled to preemptive rights and is not subject to
conversion or redemption.
RIGHT TO RECEIVE LIQUIDATION DISTRIBUTIONS
Upon a liquidation, dissolution or winding-up of our company, the holders
of common stock are entitled to share in all assets remaining after payment of
all liabilities and the liquidation preferences of any outstanding preferred
stock. Each outstanding share of common stock is, and all shares of common stock
to be issued in this offering when they are paid for will be, fully paid and
nonassessable.
PREFERRED STOCK
Following this offering, we will be authorized, subject to limitations
imposed by Delaware law, to issue up to a total of 5,000,000 shares of preferred
stock in one or more series, without stockholder approval. Our board is
authorized to establish from time to time the number of shares to be included in
each series, and to fix the rights, preferences and privileges of the shares of
each wholly unissued series and any of its qualifications, limitations or
restrictions. Our board can also increase or decrease the number of shares of
any series, but not below the number of shares of that series then outstanding,
without any further vote or action by the stockholders.
The board may authorize the issuance of preferred stock with voting or
conversion rights that could harm the voting power or other rights of the
holders of the common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, have the effect of delaying, deferring or
preventing a change in control of Transmeta and might harm the market price of
our common stock and the voting and other rights of the holders of common stock.
We have no current plans to issue any shares of preferred stock.
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WARRANTS
As of September 30, 2000, we had outstanding warrants to purchase 2,066,432
shares of our common stock at a weighted average exercise price of $1.15 per
share. The warrants are exercisable at any time up to their expiration date and
expire variously from August 2001 through April 2008.
CONVERTIBLE PROMISSORY NOTE
As of September 30, 2000, we had outstanding a promissory note in favor of
IBM in the principal amount of $600,000. The note does not bear interest and
will be converted into 1,200,000 shares of our common stock upon the closing of
this offering.
REGISTRATION RIGHTS
The holders of 73,174,342 shares of common stock issuable upon conversion
of our preferred stock have the right to require us to register their shares
with the Securities and Exchange Commission so that those shares may be publicly
resold or to include their shares in any registration statement we file. In
addition, the holder of 80,000 shares of common stock issued upon exercise of a
warrant and the holders of 2,340,784 shares of common stock issuable upon
exercise of warrants or the conversion of the promissory note in favor of IBM
have piggyback registration rights.
DEMAND REGISTRATION RIGHTS
At any time six months after the closing of this offering, the holders of
at least 20% of our shares of common stock having demand registration rights
have the right to require that we register all or a portion of their shares. We
are only obligated to file two registration statements in response to these
demand registration rights. The first demand registration right exercised must
cover a sale of securities with a total public offering price of at least $25
million and the second demand registration right exercised must cover a sale of
at least $15 million of securities. We may postpone the filing of a registration
statement for up to 120 days once in a 12-month period if we determine that the
filing would be seriously detrimental to us and our stockholders. The
underwriters of any underwritten offering will have the right to limit the
number of shares to be included in a registration statement filed in response to
the exercise of these demand registration rights due to marketing reasons.
PIGGYBACK REGISTRATION RIGHTS
If we register any securities for public sale, the stockholders with
registration rights will have the right to include their shares in this
registration, subject to specified exceptions. The underwriters of any
underwritten offering will have the right to limit the number of shares
registered by these holders under specified conditions.
FORM S-3 REGISTRATION STATEMENTS
The holders of the shares having demand registration rights can request
that we register their shares if we are eligible to file a registration
statement on Form S-3 and if the total price of the shares of common stock
offered to the public is at least $500,000. These holders may only require us to
file one Form S-3 Registration Statement in any 12-month period. We may postpone
the filing of any registration statement for up to 120 days if we determine that
the filing would be seriously detrimental to us and our stockholders, although
we may exercise this right only once in any 12-month period.
We will pay all expenses related to any demand or piggyback registration
and up to two registrations on Form S-3, except for underwriters' discounts and
commissions, which will be paid by the selling stockholders. The registration
rights described above will expire eight years following the completion of this
offering.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND
BYLAWS
The provisions of Delaware law, our certificate of incorporation and our
bylaws may have the effect of delaying, deferring or discouraging another party
from acquiring control of us.
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DELAWARE LAW
We will be subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents some Delaware corporations
from engaging, under some circumstances, in a business combination, which
includes a merger or sale of more than 10% of the corporation's assets, with any
interested stockholder, which is a stockholder who owns 15% or more of the
corporation's outstanding voting stock, as well as affiliates and associates of
the stockholder, for three years following the date that the stockholder became
an "interested stockholder" unless:
- the transaction is approved by the board before the interested
stockholder attained that status;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- the business combination is approved by the board and authorized at a
meeting of stockholders by at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.
A Delaware corporation may opt out of this provision either in its original
certificate of incorporation or in an amendment to its certificate of
incorporation or bylaws approved by its stockholders. However, we have not opted
out of this provision. The statute could prohibit or delay mergers or other
takeover or change in control attempts and, accordingly, may discourage attempts
to acquire us.
CHARTER AND BYLAWS
Our certificate of incorporation and bylaws provide that:
- no action can be taken by stockholders except at an annual or special
meeting of the stockholders called in accordance with our bylaws and
stockholders may not act by written consent;
- the approval of holders of two-thirds of the shares entitled to vote at
an election of directors will be required to adopt, amend or repeal our
bylaws or amend or repeal the provisions of our certificate of
incorporation regarding the election and removal of directors and the
ability of stockholders to take action;
- stockholders may not call special meetings of the stockholders or fill
vacancies on the board;
- our board of directors will be divided into three classes serving
staggered three-year terms. This means that only one class of directors
will be elected at each annual meeting of stockholders, with the other
classes continuing for the remainder of their respective terms;
- directors may only be removed for cause by the holders of two-thirds of
the shares entitled to vote at an election of directors; and
- we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services.
LISTING
Our common stock has been approved for quotation on the Nasdaq National
Market under the trading symbol "TMTA."
