**Exhibit 10.32****INCENTIVE RETENTION AGREEMENT**     Transmeta Corporation, a Delaware corporation (the “Company”), and John O’Hara Horsley(“Employee”) have entered into this Incentive Retention Agreement (this“Agreement”), dated as of February 27, 2007 (the “Effective Date”), on the basis ofthe following facts:R E C I T A L S     WHEREAS, the Company has filed on October 11, 2006 (the “Filing Date”) a lawsuit against IntelCorporation (“Intel”) in the United States District Court for the District of Delaware forinfringement of ten of the Company’s U.S. patents covering computer architecture and powerefficiency technologies. That action, including any additional claims and counterclaims assertedtherein or in any related case or action between Transmeta and Intel, is referred to herein as the“Lawsuit”. For purposes of this Agreement, the “Company” means the Company or thesuccessor-in-interest, if any, to materially all of the Company’s rights in the Lawsuit.     WHEREAS, Employee has substantial knowledge regarding the claims and matters at issue in theLawsuit as well as substantial professional expertise in the litigation of complex patent andintellectual property claims such as those at issue in the Lawsuit.     WHEREAS, in lieu of hiring legal counsel to manage the Lawsuit on a contingency basis, theCompany wishes to provide Employee incentives to continue to manage the Lawsuit on behalf of theCompany to a final determination or resolution.     WHEREAS, it is typical to pay legal counsel, hired on a contingency basis, approximately 25%to 40% of the amount of the judgment received by the legal counsel’s client in the related lawsuit.Accordingly, the Potential Incentive Amount (defined below) payable to Employee is calculatedbased on [*]% of the net cash value received by the Company resulting from the Lawsuit, less out ofpocket costs and attorneys’ fees paid by the Company respecting the Lawsuit. The resulting amount(the “Savings”) is then divided by [*] to derive the Potential Incentive Amount, as more fullydescribed below.     WHEREAS, the Company and Employee desire to enter into this Agreement in consideration ofEmployee’s continued employment with the Company upon the terms and conditions hereinafterprovided.AGREEMENT     NOW, THEREFORE, the parties hereto agree as follows:     **1.**     **Definitions****.**     **(a)**     “Potential Incentive Amount” means the difference of (A) [*] of the Savings minus(B) the Advance Payments. If the calculation of the Potential Incentive Amount results in anegative number, then the Potential Incentive Amount equals zero. * Confidential treatment is being requested for portions of this exhibit. The copy filed herewith omits the informationsubject to the confidential request. Omissions are designated as [*]. A complete version of this exhibit is beingfiled separately with the Securities and Exchange Commission.
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     **(b)**     “Cause” means: (i) a good faith determination by the Board of Directors of theCompany or the Company’s chief executive officer that Employee willfully failed to follow thelawful written directions of the Board of Directors or the Company’s chief executive officer to thematerial detriment of the Company; or (ii) engagement in gross misconduct that is materiallydetrimental to the Company; or (iii) willful and repeated failure or refusal to comply in anymaterial respect with the Company’s proprietary information, inventions assignment andconfidentiality agreement, or any other policies of the Company applicable to Employee wherenon-compliance would be materially detrimental to the Company, including the Company’s insidertrading policy; or (iv) conviction of, or plea of guilty to, a felony that the Company’s Board ofDirectors or chief executive officer reasonably believes would reflect adversely on the Company.     **(c)**     “Company Amount” means the sum of the present value (using a discount rate equalto the lesser of the Company’s cost of capital on the Determination Date and [*]%) on theDetermination Date of either (i) each payment made, or to be made, in cash to the Company by Inteland its affiliates as a direct result of the final, non-appealable judgment resolving all claimsand counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into a settlementresolving all claims and counterclaims made in the Lawsuit, then the amount paid to the Company byIntel and its affiliates in cash pursuant to that settlement.     **(d)**     “Determination Date” means the date of the final, non-appealable judgmentresolving all claims and counterclaims in the Lawsuit or, if the Company and Intel instead enterinto a settlement resolving all claims and counterclaims made in the Lawsuit, then the effectivedate of that settlement.     **(e)**     “Disability” means that Employee has been unable to perform with reasonable accommodationhis duties under this Agreement as the result of his incapacity due to physical or mental illness,and such inability, at least 16 weeks after its commencement, is determined to be permanent by aphysician selected by the Company or its insurers and acceptable to Employee and his legalrepresentative, such agreement as to acceptability not to be unreasonably withheld.     **(f)**     “Good Reason” means the occurrence of any of the following conditions without Employee’sinformed written consent, which condition remains in effect ten (10) days after written notice tothe Company from Employee of such condition: (a) a significant diminution by the Company inEmployee’s authority or duties in managing the Lawsuit on behalf of the Company, or (b) a materialreduction in Employee’s regular base salary (except in connection with a comparable reduction insalary applicable to all executive-level employees of the Company), or (c) the Company’s requiringEmployee to be based at any office or location more than fifty (50) miles from the Company’scurrent offices, other than on a temporary professional basis for purposes of the trial or anyother litigation-related proceedings in the Lawsuit, or (d) any material breach by the Company ofthe terms of this Agreement, including but not limited to the failure by the Company to require asuccessor-in-interest to the Company’s rights in the Lawsuit (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to assume expressly and agree to perform theCompany’s obligations under this Agreement, as if no such succession had taken place.
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     **(g)**     “Intel Amount” means the sum of the present value (using a discount rate equal tothe lesser of the Company’s cost of capital on the Determination Date (as defined above) and [*]%)on the Determination Date of either (i) each payment made, or to be made, in cash to Intel and itsaffiliates by the Company as a direct result of the final, non-appealable judgment resolving allclaims and counterclaims in the Lawsuit or (ii) if the Company and Intel instead enter into asettlement resolving all claims and counterclaims made in the Lawsuit, then the amount paid toIntel and its affiliates by the Company in cash value pursuant to that settlement.     **(h)**     “Litigation Costs” means the sum of all out of pocket costs and expenses(including all attorneys’ fees) incurred by the Company in connection with the Lawsuit (includingany settlement thereof) and ultimately paid by the Company.     **(i)**     “Net Amount” means the Company Amount minus the Intel Amount.     **(j)**     “Savings” means the difference of (A) [*]% of the Net Amount minus (B) theLitigation Costs.     **2.**     **Payment****.**     **(a)**     On entry of the final, non-appealable judgment resolving all claims and counterclaims inthe Lawsuit or, if the Company and Intel instead enter a settlement resolving all claims andcounterclaims made in the Lawsuit and that settlement requires only the payment of cash or cashequivalents by the parties to the Lawsuit, then the Company shall pay to Employee a bonus asfollows:               (i)     If Employee is employed by the Company on the Determination Date, and has beencontinuously employed by the Company on that date since the Effective Date, then the Company shallpay to Employee, within 60 calendar days following the Determination Date, an amount in cash equalto the Potential Incentive Amount.               (ii)     If the Company terminates Employee’s employment without Cause prior to the DeterminationDate (such date of termination referred to as the “Termination Date”), then the Companyshall pay to Employee, within 60 calendar days following the Determination Date, an amount in cashequal to the greater of either: (1) the product of (A) the Potential Incentive Amount multiplied by(B) the number of days from (and including) the Filing Date to (and including) the Termination Datedivided by the number of days from (and including) the Filing Date to (and including) theDetermination Date, or (2) in the event that the Termination Date occurs after judgment has beenentered in the Lawsuit but before the Determination Date, and to the extent that the finalnon-appealable judgment resolving all claims and counterclaims in the Lawsuit substantiallyreflects an affirmance of that judgment through regular appellate review, then the PotentialIncentive Amount.               (iii)     If Employee resigns as an employee of the Company without Good Reason prior to theDetermination Date, then the Company will not be obligated to pay to Employee any portion of thePotential Incentive Amount.               (iv)     If Employee resigns as an employee of the Company with Good Reason prior to theDetermination Date, then the Company will pay to Employee, within 60 calendar
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days following the Determination Date, an amount in cash determined in accordance with thesame measure set out above in Section 2(a)(ii).               (v)     If Employee’s employment is terminated prior to the Determination Date by reason of hisdeath or Disability, then the Board of Directors of the Company will have discretion to decide whatportion of the Potential Incentive Amount, if any, shall be payable to Employee or his heirs orsuccessors, based on a good faith assessment of Employee’s contribution to the litigation of theLawsuit up to the Termination Date, and consistent with the intent reflected in this Section 2(a)and below in Section 11.     **(b)**     If the final, non-appealable judgment resolving all claims and counterclaims in theLawsuit or, if the Company and Intel instead enter a settlement resolving all claims andcounterclaims in the Lawsuit and that settlement involves consideration other than cash or cashequivalents, then the Company shall pay to Employee a bonus, in an amount and on such date asdetermined by the Company’s Board of Directors in good faith, consistent with the intent reflectedin Section 2(a) above.     **(c)**     Unless in contravention of any express terms of this Agreement, any determination made bythe Company’s Board of Directors respecting the interpretation or meaning of any provision ofSections 1 or 2 will be made in its sole discretion. Any such determination will be final andbinding on the Company and Employee.     **3.**     **Advance Payments****.**If Employee is employed by the Company on December 31, 2007,and, on that date, has been continuously employed by the Company since the Effective Date, then theCompany will pay, within five days following December 31, 2007, to Employee an amount equal to$250,000. The Company shall not be obligated to make that payment if the Determination Date occursprior to December 31, 2007. In addition, on each successive yearly anniversary date of December31, 2007 that Employee is employed by the Company, and, on that date, has been continuouslyemployed by the Company since the Effective Date, then the Company will pay, within five daysfollowing that date, to Employee an amount equal to $250,000; provided, that the Company shall notbe obligated to make such payment if the Determination Date occurs prior to that date. Theaggregate of the $250,000 payments actually paid to Employee pursuant to this Section 3, withoutregard to withholdings made in accordance with Section 5, are referred to herein as the“Advance Payments.” For avoidance of doubt, any Advance Payment to Employee under thisAgreement is in addition to Employee’s regular salary as an employee of the Company, and theCompany has no right of return or refund from Employee relating to any Advance Payment made underthis Agreement. Advance Payments are intended and expected to be the fundamental element ofEmployee’s annual target bonus compensation during the pendency of the Lawsuit, and the Board ofDirectors of the Company will determine from time to time, in good faith and in its sole discretionconsistent with the applicable compensation policies of the Company, the extent to which Employeemay also be eligible to continue to participate in the Company’s regular management incentive bonusprogram based upon his other management contributions to the Company during the pendency of theLawsuit.     **4.**     **No Service or Employment Contract; No Delegation by the Board.** This Agreement doesnot confer upon Employee any right with respect to continuance of employment
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by or service with the Company, nor does it interfere in any way with the right of the Companyto terminate Employee’s employment by or service with the Company at any time for any reason.Further, this Agreement does not diminish the authority of the Company’s Board of Directors todetermine and approve any and all actions of the Company respecting the Lawsuit, nor delegate toEmployee any such authority of the Company’s Board of Directors.     **5.**     **Withholding****.**The Company is authorized to withhold from any benefit provided orpayment due hereunder the amount of withholding taxes due under any federal, state or localauthority in respect of such benefit or payment and to take such action as may be necessary in theopinion of the Company to satisfy all obligations for the payment of such withholding taxes.     **6.**     **Governing Law****.**This Agreement shall be governed and construed in accordance withthe laws of the State of California without regard to its conflict of laws provisions. The partiesagree that any action or proceeding with respect to this Agreement shall be brought in the courtslocated in Santa Clara County, California, and the parties agree to the jurisdiction thereof. Theparties hereby irrevocably waive any objection they may now or hereafter have to the laying ofvenue of any such action in the said court(s), and further irrevocably waive any claim they may nowor hereafter have that any such action brought in said court(s) has been brought in an inconvenientforum.     **7.**     **Validity and Construction****.**This Agreement has been fully negotiated by theCompany, Employee and their respective independent legal counsel. The Company understands that thePotential Incentive Amount and the Advance Payments in this Agreement are not set by law but ratherare fully negotiable between the Company and the Employee. This Agreement will be interpretedfairly in accordance with its terms and without any strict construction in favor of or againsteither the Company or Employee. The provisions of this Agreement are severable. If any provisionof this Agreement is determined by a court of law to be invalid or unenforceable, then suchprovision will be enforced to the maximum extent possible and the other provisions will remainfully effective and enforceable. In such contingency, the Company and Employee will also negotiatein good faith, if necessary, a valid and enforceable substitute provision or agreement that mostnearly effects the intent of the Company and Employee in entering into this Agreement.     **8.**     **Amendment; Waivers****.**This Agreement may not be modified, altered or changed exceptupon the express written consent of both parties wherein specific reference is made to thisAgreement. No delay on the part of any party in exercising any right, power or privilege hereundershall operate as a waiver thereof, nor shall any waiver on the part of any party of any right,power or privilege hereunder, nor any single or partial exercise of any right, power or privilegehereunder preclude any other or further exercise thereof or the exercise of any other right, poweror privilege hereunder.     **9.**     **Entire Agreement****.**This Agreement sets forth the entire agreement between theparties hereto, and fully supersedes any prior agreements or understandings between the parties.Notwithstanding the foregoing, however, the payments contemplated by this Agreement are in additionto, and not in lieu of, compensation arrangements set forth in other agreements or understandingsbetween the parties that do not relate to the subject matter hereof, including without limitationthe Company’s Retention and Severance Plan.
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     **10.**     **Headings****.**Section headings are used herein for convenience or reference only andshall not affect the meaning of any provision of this Agreement.     **11.**     **Successors****.**This Agreement shall inure to the benefit of and shall be bindingupon the Company and its successors and assigns. The rights and obligations of Employee under thisAgreement are personal in nature and shall neither be transferred nor assigned in whole or in partby Employee. Subject to the restrictions on transfer set forth in the preceding sentence of thisSection 11, in the event of Employee’s death, the rights of Employee under this Agreement shallinure to the benefit of and shall be binding on Employee’s heirs, executors, administrators, legalrepresentatives, successors and assigns.     **12.**     **Counterparts****.**This Agreement may be executed in two counterparts, each of whichshall be deemed an original but both of which together shall constitute one and the sameinstrument.     IN WITNESS WHEREOF, the parties have executed this Agreement, as of the date first writtenabove.      **COMPANY:**