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Separation Agreement and Release - Transmeta Corp. and David P. Jensen

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CONFIDENTIAL

                        SEPARATION AGREEMENT AND RELEASE

       This Separation Agreement and Release (together with its attachments, the
"Agreement") is made and entered into as of December 14, 2001 by and between
Transmeta Corporation, a Delaware corporation (together with its subsidiaries,
successors and assigns, the "Company"), and David P. Jensen (the "Employee").

       WHEREAS, the Employee has been employed by the Company in the office of
Vice President of Operations;

       WHEREAS, the Employee and the Company terminated that employment
relationship, and the Employee resigned his position as an officer of the
Company effective November 16, 2001;

       WHEREAS, the Company believes that it is in the best interest of its
shareholders to enter into a comprehensive separation agreement and release with
the Employee;

       WHEREAS, the Employee and the Company (the "Parties") desire to settle
fully and finally any and all differences between them, and so have negotiated
and agreed to a final settlement of their respective rights, obligations and
liabilities;

       NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Employee and the Company hereby
agree as follows:

       1. Resignation. The Parties agree that as of November 16, 2001, the
Employee has tendered, and the Company has accepted, his resignation as Vice
President of Operations and any and all other offices that he may have held with
the Company or any affiliate or subsidiary of the Company (the "Resignation
Date"). From the Resignation Date through and including December 31, 2001, the
Employee shall continue as an employee of the Company and provide such services
as are requested by the Company's Chief Executive Officer or President.

       2. Severance Payment. The Company shall continue to pay to the Employee
his normal salary and such other incentives and benefits as he might earn,
subject to ordinary tax withholding, in accordance with its ordinary payroll
schedule through and including December 31, 2001. The Company shall also make to
the Employee a final lump sum severance payment of $135,000, subject to the
Employee's continued compliance with the terms and covenants set out in this
Agreement, on January 2, 2002. The Employee acknowledges that such $135,000 sum
represents a gross amount before all applicable federal, state and local
withholding taxes that are required to be deducted by the Company.

       3. Benefits. From the Resignation Date through and including December 31,
2001, the Company shall continue to make available to the Employee all Company
benefits that were available to and received by the Employee immediately before
the


<PAGE>

Resignation Date. The Employee and each eligible dependent who constitutes a
qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue
Code of 1986, as amended, will be eligible to continue coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA. After December 31, 2001,
upon the Employee's timely COBRA election, and to the extent consistent with the
terms of the Company's existing health plan, the Company will continue to pay
for the Employee's present election of group health benefits (including medical,
dental, and vision coverage) for the Employee and his dependents until he finds
employment providing comparable health benefits, or through and including
December 31, 2002, whichever occurs first.

       4. Reimbursements. The Company shall promptly reimburse the Employee for
any reasonable business expenses properly incurred by the Employee through
December 31, 2001 and duly submitted by the Employee for reimbursement.

       5. Stock Options. With respect to the stock options granted to the
Employee by the Company, the Parties acknowledge and agree to the following:

       a. The parties acknowledge and agree that the stock option granted to the
Employee on July 26, 2001 to purchase 100,000 shares of the Company's common
stock at an exercise price of $3.11 per share is hereby canceled and terminated
in full. The Employee acknowledges and agrees that he has not exercised that
option to purchase any shares of the Company's common stock and that, effective
as of the date of this Agreement, he shall have no surviving right, title or
interest in that stock option.

       b. The Parties acknowledge that they previously entered into that certain
Stock Repurchase Agreement on November 27, 2001 (the "Stock Repurchase
Agreement"), pursuant to which (1) the Company exercised its right to repurchase
at the market price of $3.22 per share all 550,000 shares of the Company's
common stock that originated in the stock option granted to the Employee by the
Company on February 18, 2000 to purchase such shares for $3.62 per share (the
"Stock Option"), (2) the Company paid the price for that stock repurchase by
canceling debt owed by Employee under the promissory note issued by the Employee
for the purpose of exercising the Stock Option (the "Note") in an amount equal
to the repurchase price, and (3) the Company canceled the Note and any and all
remaining debts or obligations owed by the Employee under the Note. The Employee
acknowledges that he is solely responsible for any and all tax consequences
arising from or relating to the cancellation of the Note by the Company;
provided, however, that the Company shall make timely and appropriate tax
withholding payments in a total amount not to exceed $420,000 in the aggregate
on behalf of or for the benefit of the Employee relating to the cancellation of
the Note.

       c. The Employee acknowledges and agrees that the Company has not issued
to him any option to purchase common stock of the Company other than the stock
options described above in sections 5.a and 5.b of this Agreement, and that he
has no other right, title or interest in or to any option or right to acquire
common stock of the Company.


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<PAGE>

       6. Releases.

       a. Release by the Employee. In consideration of the Company entering into
this Agreement, the Employee, on behalf of himself and his heirs, executors,
administrators, successors and assigns (collectively, the "Releasing Employee
Parties"), knowingly and voluntarily releases and discharges the Company, each
of its subsidiaries and affiliates, their respective current and former
officers, employees, agents and directors, and any successor or assign of any of
the foregoing (collectively, the "Released Company Parties"), from any claim,
charge, action or cause of action any of the Releasing Employee Parties may have
against any of the Released Company Parties, whether known or unknown, from the
beginning of time through the Effective Date based upon any matter, cause or
thing whatsoever related to or arising out of the Employee's employment with the
Company or the termination thereof. Notwithstanding the foregoing, this release
shall not extend to or discharge any rights to or claims for indemnification,
including associated expenses and attorneys fees and the advancement of either
of the foregoing, that Executive currently has or may in the future have under
any of the following: the Certificate of Incorporation or By-Laws of the
Company, under any applicable insurance policy, or under that certain Indemnity
Agreement dated as of September 13, 2000 between Executive and the Company (the
"Indemnity Agreement"). In addition, this release shall not extend to or
discharge (i) the Employee's right to enforce the terms and conditions of this
Agreement, or (ii) any rights or claims that might arise after the Effective
Date, or (iii) the Employee's right to enforce the terms and conditions of the
Stock Repurchase Agreement, or (iv) the Employee's right to enforce the terms
and conditions of the Indemnity Agreement or the Company's Certificate of
Incorporation or its Bylaws, all of which rights shall be preserved. The
Employee represents and warrants that he currently knows of no basis for any
claims against the Company, and that neither he nor anyone acting on his behalf
has filed any claim, action, suit, complaint or proceeding against the Company
in any agency, court or other forum or tribunal.

       b. Release by the Company. In consideration of the Employee entering into
this Agreement, the Company, on behalf of itself and its subsidiaries,
successors and assigns (collectively, the "Releasing Company Parties"),
knowingly and voluntarily releases and discharges the Employee, and each of the
Employee's heirs, family members, executors, administrators and attorneys, and
any successor or assign of any of the foregoing (collectively, the "Released
Employee Parties"), from any claim, charge, action or cause of action that any
of the Releasing Company Parties may have against any of the Released Employee
Parties, whether known or unknown, from the beginning of time through the
Effective Date based upon any act, fact, omission, matter, cause or thing
whatsoever, whether or not related to or arising out of the Employee's
employment with the Company or the termination thereof. Notwithstanding the
foregoing, this release shall not extend to or discharge (i) the Company's right
to enforce the terms and conditions of this Agreement, or (ii) any rights or
claims that might arise after the Effective Date, or (iii) the Company's right
to enforce the terms and conditions of the Stock Repurchase Agreement, or (iv)
the Company's right to enforce the terms and conditions of the Proprietary
Rights Agreement, or (v) the Company's right to enforce the terms and


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<PAGE>

conditions of the Indemnity Agreement, its Certificate of Incorporation or its
Bylaws, or (vi) the Company's right to collect any applicable federal, state or
local withholding taxes that are required to be deducted by the Company for any
reason, all of which rights and claims shall be preserved. The Company
represents and warrants that it currently knows of no basis for any claims by it
against any Released Employee Party, and that neither the Company nor anyone
acting on its behalf has filed any claim, action, suit, complaint or proceeding
against any Released Employee Party in any agency, court or other forum or
tribunal.

       c. The releases and discharges provided in subsections 6.a and 6.b above
include, but are not limited to, any rights or claims under United States
federal, state or local law for wrongful or abusive discharge, or for
discrimination based upon race, color, ethnicity, sex, age, national origin,
religion, disability, sexual orientation, including rights or claims under the
Age Discrimination in Employment Act of 1967 ("ADEA"). The Employee expressly
waives any right or benefit that otherwise would be available to him pursuant to
section 1542 of the Civil Code of the State of California, which statute
provides as follows: "A Release does not extend to claims which the creditor
does not know or suspect to exist in Employee's favor at the time of executing
the release, which if known by him must have materially affected Employee's
settlement with the debtor."

       d. The Employee affirms that that he has been advised by the Company to
consult with an attorney of his choice concerning the terms and conditions set
forth herein; that he has been given at least twenty-one (21) days within which
to consider this release and its consequences; that he has seven (7) days after
the date of this Agreement to revoke and cancel this Agreement by written notice
to the Company; and that this Agreement shall not become effective or
enforceable until the eighth day following its execution (the "Effective Date").

       7. Cooperation. For the period that commences on the Effective Date and
expires on December 31, 2003, the Employee hereby agrees to assist the Company,
upon reasonable request by the Company and subject to the Employee's personal
and business schedule, in connection with any pending or future dispute,
litigation, arbitration or similar proceeding or investigation ("Dispute") or
any regulatory request or filing involving the Company, any of its directors, or
any of the directors of any of its subsidiaries, provided such Dispute or
regulatory request or filing related to a matter of which he had knowledge or
for which he was responsible prior to December 31, 2001, and that such request
for assistance is neither unduly burdensome nor unreasonable. The Company shall
promptly reimburse the Employee for, or promptly advance to the Employee, all
costs and expenses reasonably incurred by the Employee in connection with
rendering assistance to the Company in connection with any such Dispute or
regulatory request or filing, including without limitation reasonable fees and
disbursements of separate counsel for the Employee if the Employee reasonably
determines that the matter is of a nature which indicates that he should have
separate representation. Such expenses shall be reimbursed or advanced promptly
after the Employee's submission to the Company of statements in such reasonable
detail as the


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<PAGE>

Company may require. Time devoted by the Employee to assisting the Company
pursuant to this Section 7, shall not be required to exceed 20 hours in any
month.

       8. Publicity and Non-Disparagement.

       a. Unless and until the Company publicly discloses this Agreement, the
Employee shall neither discuss any aspect of the terms of this Agreement with,
nor disclose all or any portion of this Agreement to, any person or
organization. Notwithstanding anything elsewhere to the contrary, the Employee
may in any event discuss this Agreement with, and disclose all or any portion of
this Agreement to, his spouse and his legal, tax and financial advisors.

       b. The Employee agrees that he shall not intentionally make any public
statement to third parties, the public, the press or the media, or any
administrative agency that is intended to disparage the Company or to cause
injury to the Company or any of its officers, directors, or employees. The
Company agrees that it shall use its reasonable best efforts to cause its
officers, directors and employees not knowingly to make any public statement to
third parties, the public, the press or the media, or any administrative agency
intending to disparage the Employee.

       c. Notwithstanding the foregoing, nothing in this Section 8 shall prevent
any person from:

              (i) responding publicly to incorrect, disparaging or derogatory
       public statements to the extent reasonably necessary to correct or refute
       such public statements, provided, in the case of the Employee, that,
       prior to making any such responses or statements he has informed the
       Company of their substance and tenor reasonably in advance and discussed
       his intended course of action with it; or,

              (ii) disclosing this Agreement, or making any truthful statement,
       to the extent (x) necessary to enforce this Agreement or (y) required by
       law or by any court, arbitrator or administrative or legislative body
       (including any committee thereof) with apparent jurisdiction to order
       such person to disclose or make accessible such information.

       9. Non-Competition. For a one-year period commencing on December 31,
2001, the Employee shall not manage, operate, control or serve for any company
in any position or capacity in which the Employee would be responsible for or
materially involved in the manufacture or development of any x86 compatible
microprocessor product that competes or is contemplated to compete with any
product sold or under development by the Company as of the Effective Date of
this Agreement. The Employee warrants and represents that, as of the Effective
Date, he is in compliance with this Section 9.


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<PAGE>

       10. Confidentiality and Protection of Proprietary Information.

       a. The Employee hereby acknowledges and expressly reaffirms his covenants
and obligations pursuant to that certain Agreement Regarding Proprietary
Information & Inventions, effective as of February 14, 2000, between the
Employee and the Company (the "Proprietary Rights Agreement"), to which
agreement the Employee acknowledges that he is bound.

       b. The Employee hereby agrees and covenants that he shall return or cause
to be returned to the General Counsel of the Company any and all property of the
Company of any kind or description whatsoever which on the Effective Date is in
his possession or under his control (including, but not limited to, any
Confidential Information in written or other tangible form) and shall not retain
any copies, duplicates, reproductions or excerpts thereof, except as otherwise
provided hereunder. The Employee represents and warrants to the Company that he
has returned to the Company all property or data of Company of any type
whatsoever, including but not limited to any planning data, personnel data,
historical or projected financial data, compensation data, computer software and
any and all documents in hardcopy or electronic format, that has been in
Employee's possession or control. Anything to the contrary notwithstanding,
nothing in this Section 10 shall prevent the Employee from retaining papers and
other materials of a personal nature, including personal diaries and Rolodexes,
information showing his compensation or relating to reimbursement of expenses,
information that he reasonably believes may be needed for tax purposes, and
copies of plans, programs and agreements relating to his employment with the
Company.

       c. Notwithstanding the foregoing, the provisions of this Section 10 shall
not apply (i) to any disclosure or use of Confidential Information in connection
with providing services or assistance pursuant to Section 7, (ii) to any
disclosure that may be required by law or by any court, arbitrator, or
administrative or legislative body with apparent jurisdiction to order the
Employee to disclose or provide any such Confidential Information, (iii) to any
disclosure of Confidential Information reasonably required to enforce the terms
of this Agreement, or (iv) to any Confidential Information that becomes
generally known to the public other than as a result of any violation of this
Agreement by the Employee.

       11. Non-Solicitation. For a one-year period commencing on December 31,
2001, the Employee shall not, directly or indirectly, without the prior written
consent of the Company, knowingly solicit, induce, or attempt to induce, either
for himself or on behalf of any company or business organization in which he
serves as an officer, employee, partner, director, or consultant, any employee
or consultant of the Company to terminate his, her or its employment or
consulting relationship with the Company, whether for employment or to consult
with a third party or otherwise. Anything to the contrary notwithstanding, the
Company agrees that this Section 11 does not prohibit the Employee from (i)
responding to an unsolicited request from any present or former employee of the
Company for advice on employment matters, or (ii) responding to an unsolicited
request for an employment reference for any present or former employee of the
Company, by


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<PAGE>

providing a reference setting out his personal views about such present or
former employee.

       12. Indemnification. The Company agrees that, if the Employee is made a
party to, is threatened to be made a party to, receives any legal process in, or
receives any discovery request or request for information in connection with,
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he was a director,
officer, employee, consultant or agent of the Company, the Employee shall be
indemnified and held harmless by the Company to the fullest extent permitted or
authorized by the Company's Articles of Incorporation and By-Laws against any
and all costs, expenses, liabilities and costs incurred or suffered by the
Employee in connection therewith, and such indemnification shall continue as to
the Employee even though he has ceased to be a director, officer, member,
employee, consultant or agent of the Company or other entity and shall inure to
the benefit of the Employee's heirs, executors and administrators.

       13. Notice. Any notice, request, or other communication given in
connection with this Agreement shall be in writing and shall be deemed to have
been given (i) when delivered personally to the recipient or (ii) provided that
a written acknowledgement of receipt is obtained, three days after being sent by
prepaid certified or registered mail, or two days after being sent by a
nationally recognized overnight courier, to the address specified below for the
recipient (or to such other address as the recipient shall have specified by ten
days' advance written notice given in accordance with this Section 13). Such
communication should be addressed to the Employee at his principal residence and
to the Company at its corporate headquarters to the attention of the General
Counsel.

       14. Entire Agreement. Except as expressly set forth herein, this
Agreement contains the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior agreements, understandings,
discussions, negotiations, and undertakings, whether written or oral, between
the parties with respect thereto. Notwithstanding the foregoing sentence, the
Parties acknowledge and agree that this Agreement shall not supersede any of the
extant written agreements specifically referred to or identified in the
provisions this Agreement. This Agreement may be modified only by a written
document signed by the Employee and a duly authorized officer of the Company.
Any waiver by any person of any provision of this Agreement shall be effective
only if in writing and signed by the person against whom enforcement of the
waiver is sought. For any waiver or modification to be effective, it must
specifically refer to this Agreement and to the terms or provisions being
modified or waived. No waiver of any provision of this Agreement shall be
effective as to any other provision of this Agreement except to the extent
specifically provided in an effective written waiver.

       15. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.


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<PAGE>

       16. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California.

       17. Headings. The headings of the Sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.

       18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. Signatures delivered by
facsimile shall be effective for all purposes.

       IN WITNESS WHEREOF, the Parties have executed this Agreement.

PLEASE READ CAREFULLY. THIS SEPARATION AGREEMENT AND RELEASE INCLUDES A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.


                                  THE EMPLOYEE:  David P. Jensen

                                  Executed this 14th day of December, 2001.

                                   /s/ David P. Jensen
                                   ------------------------------
                                   David P. Jensen

                                   THE COMPANY:  Transmeta Corporation

                                   Executed this 14th day of December, 2001.

                                   Transmeta Corporation


                                   By: /s/ R. Hugh Barnes
                                       --------------------------
                                       R. Hugh Barnes
                                       President and Chief Operating Officer

                    Address:       3940 Freedom Circle
                                   Santa Clara, California 95054
                                   Telephone:  408-919-3000


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