CONFIDENTIAL   EXHIBIT 10.21

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (together with its attachments, the
“Agreement”) is made and entered into as of March 31, 2005 by and between
Transmeta Corporation, a Delaware corporation (together with its subsidiaries,
successors and assigns, the “Company”), and Matthew R. Perry (the “Executive”).

     WHEREAS, the Executive has been employed by the Company as its President
and Chief Executive Officer (“CEO”);

     WHEREAS, the Executive and the Company terminated that employment
relationship, and the Executive resigned as President and CEO of the Company and
as a member of the Company’s Board of Directors, effective March 31, 2005;

     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 Executive;

     WHEREAS, the Executive 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 Executive and the Company
hereby agree as follows:

     1. The Parties agree that as of March 31, 2005, the Executive’s employment
relationship with the Company is terminated. The Executive hereby resigns as
President and Chief Executive Officer, as a member of the Company’s Board of
Directors, and each other office and position in the Company, effective
March 31, 2005.

     2. Severance Payment. The Company shall make to the Executive a final lump
sum severance payment of $445,000 in two installments, subject to the
Executive’s continued compliance with the terms and covenants set out in this
Agreement, according to the following schedule: the first installment of
$300,000 shall be paid on or before April 15, 2005, and the second and final
installment of $145,000 shall be paid on the earlier of (a) the Monday following
the Company’s next annual meeting of stockholders or (b) June 30, 2005. The
Executive acknowledges that such $445,000 sum represents a gross amount before
all applicable federal, state and local withholding taxes that are required to
be deducted by the Company.

     3. Health Benefits. Pursuant to the provisions of COBRA, the Company will
continue to pay for the Executive’s present election of group health benefits
for the Executive and his dependents until he finds employment providing
comparable health benefits, or through and including March 31, 2006, whichever
occurs first.

 

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     4. Housing Benefits. The Company will continue to reimburse the Executive
for all regular payments under the Executive’s present residential lease
agreement through the expiration of that lease agreement on or about June 30,
2005, and, if necessary, at an equivalent rate thereafter until he first finds
other employment or through and including March 31, 2006, whichever occurs
first.

     5. Reimbursements. The Company shall promptly reimburse the Executive for
any reasonable business expenses properly incurred by the Executive through
March 31, 2005 and duly submitted by the Executive for reimbursement. By or
before the Effective Date, the Company will pay to Executive all expense
reimbursements, accrued vacation, outstanding benefits, salary and any similar
payments, if any, owed by the Company to Executive as of the separation date of
March 31, 2005.

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

     a. The Parties acknowledge and agree that the Company has granted to
Executive certain options to purchase the Company’s common stock as follows:
(1) an April 2002 grant to purchase up to 2,000,000 shares of the Company’s
common stock at an exercise price of $2.46 per share; (2) a November 2002 grant
to purchase up to 1,000,000 shares of the Company’s common stock at an exercise
price of $1.05 per share; (3) a May 2003 grant to purchase up to 1,000,000
shares of the Company’s common stock at an exercise price of $1.57 per share;
and (4) a May 2004 grant to purchase up to 200,000 shares of the Company’s
common stock at an exercise price of $2.15 per share (the “Stock Options”). The
Parties acknowledge and agree that each of the Stock Options is governed by the
terms of their respective grants.

     b. The Executive 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 subsection 6.a 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.

     7. Mutual Releases.

     a. Release by the Company. In consideration of the Executive 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 Executive, and each of the
Executive’s heirs, family members, executors, administrators and attorneys, and
any successor or assign of any of the foregoing (collectively, the “Released
Executive Parties”), from any claim, charge, action or cause of action that any
of the Releasing Company Parties may have against any of the Released Executive
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 Executive’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

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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 Proprietary Rights Agreement, or (iv) the Company’s right to enforce the
terms and conditions of the Indemnity Agreement, its Certificate of
Incorporation or its Bylaws, or (v) 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 Executive Party, and that
neither the Company nor anyone acting on its behalf has filed any claim, action,
suit, complaint or proceeding against any Released Executive Party in any
agency, court or other forum or tribunal.

     b. Release by the Executive. In consideration of the Company entering into
this Agreement, the Executive, on behalf of himself and his heirs, executors,
administrators, successors and assigns (collectively, the Releasing Executive
Parties”), knowingly and voluntarily releases and discharges the Company and its
subsidiaries and affiliates, the respective current and former officers,
employees, attorneys, agents and directors of the Company and its subsidiaries
and affiliates, and any successor or assign of any of the foregoing
(collectively, the “Released Company Parties”), from any claim, charge, action
or cause of action that any of the Releasing Executive 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 act, fact, omission,
matter, cause or thing whatsoever, whether or not related to or arising out of
the Executive’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 or contribution, 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, under that certain Indemnity Agreement dated as of April 10,
2002 between Executive and the Company (the “Indemnity Agreement”), or under any
other provision or principle of law, or otherwise. In addition, this release
shall not extend to or discharge (i) the Executive’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 Executive’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 and claims shall be preserved.
The Executive represents and warrants that he currently knows of no basis for
any claims by him against any Released Company Party, and that neither he nor
anyone acting on his behalf has filed any claim, action, suit, complaint or
proceeding against any Released Company 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 Executive and the
Company each expressly waives any right or benefit that otherwise would be

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available to them, respectively, pursuant to section 1542 of the Civil Code of
the State of California, which statute provides as follows: “A general release
does not extend to claims which the creditor does not know or suspect to exist
in his favor at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor.”

     d. The Executive 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 availed himself of that right; 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”).

     8. Cooperation. For the period that commences on the Effective Date and
expires on March 31, 2006, the Executive hereby agrees to assist the Company,
upon reasonable request by the Company, and subject to reasonable accommodation
of the Executive’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 that such Dispute or regulatory request or filing related
to a matter of which he had knowledge or for which he was responsible prior to
March 31, 2005, and that such request for assistance is neither unduly
burdensome nor unreasonable. The Company shall promptly reimburse the Executive
for, or promptly advance to the Executive, all costs and expenses reasonably
incurred by the Executive 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
Executive if the Executive 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 Executive’s submission to the
Company of statements in such reasonable detail as the Company may require. Time
devoted by the Executive to assisting the Company pursuant to this Section 8,
shall not be required to exceed 20 hours in any month.

     9. Publicity and Non-Disparagement.

     a. Unless and until the Company publicly discloses this Agreement, the
Executive 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 Executive
may in any event discuss this Agreement with, and disclose all or any portion of
this Agreement to, his legal, tax and financial advisors.

     b. The Executive 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

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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 Executive.

     c. Notwithstanding the foregoing, nothing in this Section 9 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 Executive, 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) in response to a subpoena,
legal process or as 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.

     10. Confidentiality and Protection of Proprietary Information.

     a. The Executive hereby reaffirms his obligations pursuant to that certain
Agreement Regarding Proprietary Information & Inventions, effective as of
April 10, 2002, between the Executive and the Company (the “Proprietary Rights
Agreement”), to which agreement the Executive acknowledges that he is bound;
provided, however, that the provisions of paragraph 11 of this Agreement
(“Non-Solicitation”) shall supersede the provisions of paragraph 10.b of the
Proprietary Rights Agreement.

     b. The Executive 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 Executive 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 Executive 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.

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     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 8, (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
Executive 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 Executive.

     11. Non-Solicitation. For the one-year period that commenced on March 31,
2005, the Executive 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 Executive from
(i) responding in any manner to an unsolicited request from any present or
former employee of the Company for advice or information on employment matters,
or (ii) responding to an unsolicited request for an employment reference for any
present or former employee of the Company, by providing a reference setting out
his personal views about such present or former employee.

     12. Indemnification. Notwithstanding anything in this Agreement to the
contrary, the Company and Executive agree that the Indemnity Agreement, and the
parties’ respective obligations thereunder, shall remain in full force and
effect.

     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 14). Such
communication should be addressed to the Executive 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. This Agreement may be modified only by a written document
signed by the Executive 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

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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.

     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.

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     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 EXECUTIVE: Matthew R. Perry
 
            Executed this 2nd day of April, 2005.
 
                           /s/ Matthew R. Perry                          Matthew
R. Perry
 
            THE COMPANY: Transmeta Corporation
 
            Executed this 2nd day of April, 2005.
 
            Transmeta Corporation
 
       

  By:             /s/ John O’Hara Horsley

       

                John O’Hara Horsley

                Vice President, General Counsel & Secretary

         
 
  Address:   3990 Freedom Circle

      Santa Clara, California 95054

      Telephone: 408-919-3000

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