According the Form 10-K for the year ended December 31, 2003, in July 2002, plaintiffs moved for class certification and initiated discussion of a proposed settlement. Plaintiffs and defendants entered into an agreement in October 2002 to settle all claims that might have been brought in this action for approximately $5.5 million, all of which monies have been fully funded by defendants’ director and officer liability insurance. In March 2003, after proper class notice and hearings, the Court approved the settlement and entered judgment for defendants, dismissing the action. In April 2003, a plaintiff’s law firm that was not selected by the Court to serve as class counsel filed a notice of appeal relating to certain Court orders addressing that firm’s applications to the Court for attorney’s fees. In August 2003, on appellant’s own motion, the Court of Appeals dismissed the appeal.

A class action complaint was filed against Transmeta Corporation. The complaint charges Transmeta Corporation and its top officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. The complaint alleges that defendants issued false and misleading statements about Transmeta’s business and its principal line of microprocessors, the Crusoe. The complaint further alleges these false statements caused the Company’s stock price to be artificially elevated, allowing the defendants to reap over $14 million in insider profits within the two months prior to the Company revealing the truth about Transmeta’s worsening financial position. The Complaint alleges that as a result of the defendants’ conduct, plaintiffs and other members of the Class suffered damages.