Exhibit 10.1

 

SETTLEMENT AGREEMENT [SEMTECH/AMM/LMCC]

 

This Settlement Agreement and Mutual Release (“Agreement”) is made by and among
Semtech Corporation (“Semtech”) on the one hand, and American Manufacturers
Mutual Insurance Company (“AMM”) and Lumbermens Mutual Casualty Company (“LMCC”)
on the other hand. AMM and LMCC shall be referred to herein collectively as
“AMM/LMCC.” Semtech and AMM/LMCC shall be referred to herein individually as a
“Party” and collectively as the “Parties.” The “Effective Date” of this
Agreement is May 28, 2005.

 

RECITALS

 

WHEREAS, AMM provided policies of insurance to Semtech, including without
limitation, commercial general liability insurance under written insurance
policies 3MH 732 031-00 (effective 4/01/01 – 4/01/02) (the “2001 CGL Policy”)
and 3MH 732 031-01 (effective 4/01/02 – 4/01/03) (the “2002 CGL Policy”); and
errors and omissions liability insurance under written policy 3MH 732 031-00
(effective 4/01/01 – 4/01/02) (the “2001 E&O Policy”) (collectively, the “AMM
Policies”); and

 

WHEREAS, LMCC provided policies of insurance to Semtech, including without
limitation, errors and omissions liability insurance under written insurance
policy 3LH 002606 00 (effective 4/01/02 – 4/01/03) (the “LMCC Policy”); and

 

WHEREAS, one of Semtech’s customers (“Customer”) made a claim against Semtech
alleging over one hundred million dollars of damages arising out of the failures
of allegedly defective computer chips manufactured by Semtech and incorporated
into certain Customer products (i.e., the “Semtech products”); and

 

WHEREAS, Semtech, with AMM/LMCC’s consent, and Customer entered into a
settlement agreement in or around March 2003 that, inter alia, obligated Semtech
to make

 

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payments to Customer totaling $12 million in exchange for a release (the
“Customer Settlement”); and

 

WHEREAS, Semtech sought coverage under the AMM Policies and the LMCC Policy for
Customer’s claim for damages and related defense fees and claims expenses
arising out of the failures of the Semtech products referenced above, including
indemnity coverage for the Customer Settlement (the “Insurance Claim”); and

 

WHEREAS, on April 8, 2003, Semtech filed a lawsuit in the United States District
Court for the Central District of California (the “Court”), entitled Semtech
Corporation v. Royal Insurance Company of America, et al., Case No. CV03-2460
GAF (PJWx), seeking declaratory relief and damages for breach of contract (the
“Coverage Action”); and

 

WHEREAS, Semtech and AMM/LMCC desire to settle any disputes between them which
they now have relating to the Coverage Action, the Customer Settlement and the
Insurance Claim;

 

NOW, THEREFORE, in consideration of the mutual promises, covenants, obligations,
agreements, and other undertakings set forth herein, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree by and among themselves, each with the other, as follows:

 

AGREEMENT

 

1. PAYMENTS.

 

1.1. Payment By AMM. Within thirty (30) days following the execution of this
Agreement by Semtech, AMM shall deliver to Semtech’s attorneys a check or draft
in the amount of One Million U.S. Dollars ($1,000,000.00) made payable to
“Semtech Corporation.” The foregoing payment shall be made as an indemnity
payment under the 2001 CGL Policy and shall be referred to herein as the
“Settlement Payment.” AMM hereby stipulates that the

 

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Settlement Payment exhausts the $1,000,000 “Each Occurrence Limit” under the
2001 CGL Policy applicable to the Insurance Claim.

 

1.2. Payment By LMCC. LMCC has previously made payments under the LMCC Policy to
Semtech totaling One Hundred Thirty-Four Thousand Nine Hundred Nine Dollars and
Seventy-Two Cents ($134,909.72) for attorneys’ fees and cost allegedly incurred
by Semtech arising from the Insurance Claim. The foregoing payments shall be
referred to herein as the “Defense Payments.”

 

2. RELEASES.

 

2.1. Release by Semtech. Upon Semtech’s receipt of the Settlement Payment, but
subject to the Court’s entry of the stipulated dismissal referenced in Section
4.1, Semtech and each of its parents, subsidiaries, affiliates, predecessors,
trustees, successors and assigns (the “Semtech Releasors”), do forever release
and absolutely and forever discharge and covenant not sue AMM and LMCC and each
of their respective past, present and future businesses, affiliates, parents,
subsidiaries, joint venturers, assigns, trustees, owners, principals, officers,
directors, shareholders, agents, employees, independent contractors, suppliers,
reinsurers, attorneys, and representatives, and each of them (collectively, the
“AMM/LMCC Releasees”), of and from any and all liability, claims, defenses,
causes of action, obligations, duties, penalties, attorneys’ fees, costs,
damages, injuries, or liabilities of any nature whatsoever, whether based on
contract, tort, statute or other legal or equitable theory of recovery, whether
contingent or liquidated, which the Semtech Releasors have relating to or
arising out of the Insurance Claim or the Coverage Action, including, without
limitation, any claims for insurance coverage under the AMM and/or LMCC
policies, breach of the AMM Policies or the LMCC Policy, breach of any implied
covenant of good faith and fair dealing, bad faith and violations of the Unfair
Practices Act (i.e., Insurance Code § 790, et seq.), arising from the Customer
Settlement and/or Insurance Claim. Notwithstanding anything else in this
Agreement, the Semtech Releasors are not releasing: (1) any other defendant in
the coverage Action;

 

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(2) any reinsurer of any of the AMM/LMCC Releasees to the extent such reinsurer
is also an insurer of any of the Semtech Releasors; or (3) any of the AMM/LMCC
Releasees from any duties or obligations under this Agreement.

 

2.2. Release by AMM/LMCC. In exchange for the foregoing release and other
valuable consideration, AMM and LMCC, and each of their respective parents,
subsidiaries, affiliates, predecessors, trustees, successors and assigns (the
“AMM/LMCC Releasors”), upon Semtech’s receipt of the Settlement Payment, but
subject to the Court’s entry of the stipulated dismissal referenced in Section
4.1, do forever release and absolutely and forever discharge and covenant not
sue Semtech and each of its past, present and future businesses, affiliates,
parents, subsidiaries, joint venturers, assigns, trustees, owners, principals,
officers, directors, shareholders, agents, employees, independent contractors,
suppliers, insurers (excluding other defendants in the coverage Action),
reinsurers, attorneys, and representatives, and each of them (collectively, the
“Semtech Releasees”), of and from any and all liability, claims, defenses,
causes of action, obligations, duties, penalties, attorneys’ fees, costs,
damages, injuries, or liabilities of any nature whatsoever, whether based on
contract, tort, statute or other legal or equitable theory of recovery, whether
contingent or liquidated, which the AMM/LMCC Releasors have relating to or
arising out of the Insurance Claim or the Coverage Action, including, without
limitation, any claims for breach of the AMM Policies or the LMCC Policy, breach
of any implied covenant of good faith and fair dealing, bad faith, any claims
relating to the Settlement Payment or the Defense Payments and any claims
relating to the tender or investigation of the Insurance Claim. Notwithstanding
anything else in this Agreement, the AMM/LMCC Releasors are not releasing: (1)
any reinsurer of any of the Semtech Releasees to the extent such reinsurer is
also a reinsurer of any of the AMM/LMCC Releasors; (2) Royal Insurance Company
of America, and its successors and assigns (“Royal”) or National Union Fire

 

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Insurance Company of Pittsburgh, PA, and its successors and assigns (“NUFIC”);
or (3) any of the Semtech Releasees from any duties or obligations under this
Agreement.

 

2.3. All Claims Included. With respect to the claims specifically released in
Sections 2.1 and 2.2 above, the Parties agree that this Agreement includes all
claims of every kind and nature relating to the Insurance Claim or the Coverage
Action. As it pertains to such released claims, the Parties hereby expressly
waive any and all rights and benefits conferred upon them by the provisions of
Section 1542 of the California Civil Code and all similar provisions of the laws
of any other State, Territory or other jurisdiction. Section 1542 reads in
pertinent part:

 

“A general release does not extend to claims that 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.”

 

The Parties each hereby acknowledge that the foregoing waiver of the provisions
of Section 1542 of the California Civil Code and all similar provisions of the
laws of any other State, Territory or other jurisdiction was separately
bargained for and that they would not enter into this Agreement unless it
included a broad release of all unknown claims relating to the Insurance Claim
or the Coverage Action, including specifically any claim of fraud or
misrepresentation in the inducement of this Agreement. The Parties each
expressly agree that all release provisions in this Agreement shall be given
full force and effect in accordance with each and all of their express terms and
provisions, including those terms and provisions relating to unknown,
unsuspected or future claims, demands and causes of action. The Parties each
assume for themselves the risk of the subsequent discovery or understanding of
any matter, fact or law, that if now known or understood, would in any respect
have affected his, her or its entering into this Agreement.

 

3. ASSIGNMENT.

 

3.1. AMM and LMCC, and each of them, assign all of their respective rights,
claims, defenses and causes of action against any other Semtech insurer,
including, without limitation,

 

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Royal and NUFIC, to contribution and/or indemnity arising out of the Settlement
Payment or the Defense Payments. In consideration for the assignment, Semtech
agrees to defend and indemnify AMM and LMCC against insurance contribution and
indemnity claims brought by any insurer (including Royal and NUFIC) arising from
the Insurance Claim or Customer Settlement, but in the manner set forth in
Section 4 below.

 

4. DISMISSALS AND COVENANTS.

 

4.1. Stipulated Dismissal With Prejudice. Semtech covenants that within five (5)
business days of its receipt of the Settlement Payment, Semtech will deliver to
counsel for AMM/LMCC a stipulated dismissal of AMM/LMCC with prejudice from the
Coverage Action without costs, sanctions or attorneys’ fees against any of the
Parties, in substantially the same form as Exhibit 1 hereto. AMM/LMCC covenants
that it shall, in turn, execute and file such stipulated dismissal in the United
States District Court for the Central District of California.

 

4.2 Covenants Regarding Certain Present And Future Actions. In all present or
future actions by Semtech against Royal, NUFIC or any insurer, wherein it
asserts claims for insurance coverage relating to the Customer Settlement and
the Insurance Claim, Semtech hereby agrees that it will not seek recovery of
damages, including insurance coverage, from Royal, NUFIC or other insurer(s) of
an amount exceeding each insurers’ respective aggregate proportional contractual
share of the total contractual liability, based upon each insurer’s relative
degree of contractual liability or responsibility. Said another way, Semtech
shall only pursue Royal, NUFIC and others on a contractually proportionate
basis. The intent of limiting Semtech’s recovery to Royal’s, NUFIC’s and other’s
aggregate share of the total liability is to eliminate any contribution and
indemnity claim Royal, NUFIC or others might make against AMM or LMCC.

 

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4.3 Defense, Indemnity and Judgment Reduction. Notwithstanding the foregoing
provision, if any insurer nevertheless seeks indemnity or contribution from AMM
or LMCC as a result of a recovery by Semtech in the Coverage Action, Semtech
agrees to defend AMM and LMCC (i.e., pay attorneys’ fees and costs) against such
claim. Semtech’s agreement to pay defense attorneys’ fees and costs shall be
limited to, and capped at $75,000. Should defense attorneys’ fees and costs
exceed $75,000, AMM and LMCC shall thereafter assume the defense fees and costs.
At all times, however, AMM and LMCC shall have the right to assign counsel and
control the defense. If any insurer shall then obtain a judgment (the
“Judgment”) against AMM or LMCC, notwithstanding the first sentence of Section
4.2, then Semtech shall have the option to either (1) fully indemnify AMM and
LMCC against such Judgment; or (2) reduce its recovery against the other
insurers (including Royal or NUFIC) in an amount equal to the Judgment obtained
by such other insurers against AMM or LMCC. If Semtech, at its own expense and
cost, wishes to appeal the entry of the Judgment, it shall be entitled to fully
bond the Judgment, thereby staying execution against AMM and LMCC, in lieu of
reducing Semtech’s recovery pending the outcome of said appeal. All such costs
of appeal, including interest, shall therefore be borne by Semtech.

 

4.4 Cooperation by Semtech. In the event an insurer commences an action for
contribution and/or indemnity against AMM or LMCC, Semtech agrees to cooperate
in the defense of that action, including, but not limited to, providing Semtech
documents and witnesses during discovery and trial.

 

5. REPRESENTATIONS AND WARRANTIES.

 

5.1. Prudence. The Parties, and each of them, represent and warrant that in
executing this Agreement they rely solely upon their own judgment, belief and
knowledge, and the advice and recommendations of their own independently
selected counsel, concerning the nature, extent

 

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and duration of their rights and claims hereunder and regarding all matters
which relate in any way to the subject matter hereof, and that, except as
provided herein, they have not been influenced to any extent whatsoever in
executing this Agreement by any representations, statements or omissions
pertaining to any of the foregoing matters by any party or by any person
representing any party to this Agreement. The Parties, and each of them, further
represent and warrant to each other that he, she or it has made such
investigation of the facts pertaining to the settlement, this Agreement and all
of the matters pertaining thereto, as he, she or it deems necessary. Each Party
assumes the risk of mistake as to facts or law.

 

5.2. Authority to Extinguish and Assign Claims. Each person executing this
Agreement on behalf of any other person or entity does hereby personally
represent and warrant to the other Parties that the Party for which he or she is
signing has taken all necessary action to approve the making and performance of
this Agreement, that he or she is competent to execute this instrument and that
he or she is duly authorized, and has the full right and authority, to execute
this Agreement on such Party’s behalf.

 

5.3. No Assignment or Transfer of Claims. The Parties, and each of them, warrant
and represent to each other that they retain the sole right to and ownership of
all rights, title and interest in and to every claim they release or assign
herein and that they have not assigned, committed, or permitted, or agreed to
any sale, encumbrance, hypothecation or transfer, whether by operation of law or
otherwise, or otherwise transferred any interest in any of the claims they
release or assign herein to any other person or entity.

 

6. CONFIDENTIALITY.

 

6.1. The Parties agree that the terms and provisions of this Agreement shall be,
and remain, confidential as provided in this Section 6.1. Accordingly, neither
this Agreement, nor any of its terms, shall be disclosed, published or in any
way used in any proceeding, except: (a) in any action or proceeding where the
existence or terms of the Agreement are at issue,

 

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including without limitation the Coverage Action, or where one of the Parties is
seeking enforcement of this Agreement; (b) as required by law, regulation or
court order; (c) to any regulator, member, subsidiary, affiliate, associated, or
parent companies of the Parties and their counsel; (d) by written consent of the
Parties hereto, such consent not to be unreasonably withheld; (e) to insurers or
prospective insurers of Semtech or the insurers, reinsurers or prospective
insurers and reinsurers of AMM/LMCC; (f) as necessary for the conduct of the
Parties’ business, including disclosures determined to be necessary by the Party
and/or its auditors, state and/or federal regulatory authorities or taxing
authorities, and/or the Party’s existing or prospective lenders; and (g) to the
Parties’ accountants or other such consultants.

 

7. MISCELLANEOUS.

 

7.1. Headings. Section headings are for convenience only and shall not be
construed to change or affect the text of this Agreement.

 

7.2. Integration. Except for the AMM Policies and the LMCC Policy, this
Agreement and the attachments incorporated herein contain the entire agreement
between and among the Parties relating to the Insurance Claim and the Coverage
Action, and all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, relating to those matters are
merged into this Agreement.

 

7.3. Governing Law. This Agreement is governed by California law, without regard
to California’s conflict of law principles.

 

7.4. Survival of Representations and Warranties. All representations and
warranties set forth in this Agreement shall be deemed continuing and shall
survive the Effective Date of this Agreement.

 

7.5. Further Assurances. The Parties agree to execute such other documents and
take such actions as may reasonably be necessary to further the purpose of this
Agreement, including, without limitation, cooperating and supporting any motion
or stipulation for

 

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determination that the Settlement Payment exhausts the “Each Occurrence Limit”
under the 2001 CGL Policy applicable to the Insurance Claim, bringing a motion
or executing a stipulation among the parties to confirm this settlement as a
good faith settlement and bringing a motion against non-settling insurers
(including Royal and NUFIC) to bar contribution or indemnity.

 

7.6. No Benefit to Non-Settling Parties. Except as expressly provided herein,
this Agreement shall not confer any right or benefit upon, or release from
liability any person who is not a party to this Agreement.

 

7.7. No Admissions. Except as provided in Section 1.1, none of the Parties have
made, nor shall they be deemed to have made, any admission of any kind by their
negotiation of or entry into this Agreement. Neither this Agreement nor any
provision contained herein shall be construed by any person as an admission by
any of the Parties of any liability for, related to or arising out of any of the
claims released herein or any other claims of any other nature. The Parties are
entering into this Agreement for the purpose of resolving disputed issues
between them and to avoid the costs and risks of litigation.

 

7.8. Counterpart Originals. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement. Facsimile signatures shall be considered the same as
originals.

 

7.9. Binding Effect. This Agreement binds and inures to the benefit of the
Parties, their assigns, heirs, administrators, executors, representatives,
beneficiaries and successors, and each of them.

 

7.10. Modification. This Agreement cannot be modified or amended except by
written agreement signed on behalf of each of the Parties.

 

7.11. Waiver. No portion of this Agreement may be waived except by written
instrument signed on behalf of the Party on behalf of whom the waived provision
is designed to

 

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benefit. A waiver of one provision is not a waiver of any other. Failure to
enforce any provision of this Agreement shall not waive that provision or any
other.

 

7.12. Construction. Any rule of construction to the effect that ambiguities in a
writing are to be construed against the drafting party does not apply in the
interpretation of this Agreement, or any portion hereof, which has actively been
negotiated and drafted by counsel for each of the Parties, and all of them.

 

7.13. Severability. Provided the remainder of this document does not frustrate
the purpose and intent of the law and the Parties in entering into this
Agreement, in the event that any portion of this Agreement shall be judicially
determined to be invalid or unenforceable to any extent, the same shall to that
extent be deemed severable from this Agreement and the invalidity or
unenforceability thereof shall not affect the validity and enforceability of the
remaining portion of this Agreement.

 

8. DECLARATIONS.

 

BY SIGNING THIS AGREEMENT, EACH PARTY ACKNOWLEDGES AND DECLARES: (A) THAT THE
PARTY HAS FULLY AND CAREFULLY READ THE AGREEMENT; (B) THAT THE PARTY CLEARLY
UNDERSTANDS THAT THE AGREEMENT IS A COMPLETE AND FINAL SETTLEMENT; (C) THAT THE
PARTY CLEARLY UNDERSTANDS THE MEANING, PURPOSE, AND INTENT OF EACH PROVISION OF
THE AGREEMENT, AND THAT EACH PROVISION IS CLEAR AND DEFINITE; (D) THAT SEMTECH
ON THE ONE HAND, AND AMM AND LMCC ON THE OTHER, HAVE NOT RELIED UPON ANY
REPRESENTATION OF THE OTHER IN AGREEING TO THE TERMS OF THIS AGREEMENT; AND (E)
THAT THE PARTY HAS BEEN REPRESENTED BY COMPETENT LEGAL COUNSEL WITH RESPECT TO
NEGOTIATING, EXPLAINING, AND ENTERING INTO THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the Parties, and each of them, hereby execute this
Settlement Agreement and Mutual Release in consideration of the mutual promises
made herein, as of the dates indicated below.

 

       

APPROVED AND AGREED TO:

       

SEMTECH CORPORATION

Dated: June 30, 2005

     

By:

  /s/    JOHN M. BAUMANN                    

Its:

  Treasurer        

AMERICAN MANUFACTURERS MUTUAL

       

INSURANCE COMPANY

Dated: June 30, 2005

     

By:

  /s/    DOUGLAS R. WENZEL                    

Its:

  Claims Analyst        

LUMBERMENS MUTUAL CASUALTY

       

COMPANY

Dated: June 30, 2005

     

By:

  /s/    DOUGLAS R. WENZEL                    

Its:

  Claims Analyst

 

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     Exhibit 1      1   

BRYAN M. BARBER (State Bar No. 118001)

bbarber@barberlg.com

FULTON M. SMITH (State Bar No. 121071)

fsmith@barberlg.com

BARBER LAW GROUP

101 California Street, Suite 1850

San Francisco, California 94111

Telephone: (415) 273-2930

Facsimile:   (415) 273-2940

     2         3         4         5        

6   

Attorneys for Defendants

AMERICAN MANUFACTURERS MUTUAL

INSURANCE COMPANY and

LUMBERMENS MUTUAL CASUALTY

COMPANY

     7         8        

9   

UNITED STATES DISTRICT COURT

10    CENTRAL DISTRICT OF CALIFORNIA 11    WESTERN DIVISION 12           13   
SEMTECH CORPORATION,    Case No.: CV 03-2460 GAF (PJWx) 14   

Plaintiff,

   STIPULATION AND REQUEST FOR DISMISSAL WITH PREJUDICE OF ACTION AS BETWEEN
PLAINTIFF SEMTECH CORPORATION AND DEFENDANTS AMERICAN MANUFACTURES MUTAL
INSURANCE COMPANY AND LUMBERMENS MUTUAL CASUALTY COMPANY 15   

 

v.

   16   

 

ROYAL INSURANCE COMPANY OF AMERICA, et al,

   17         18   

Defendants.

   19        

20        

Trial Date:        December 5, 2005

Courtroom:       740

Judge:                Hon. Gary A. Feess

21         22        

23   

IT IS HEREBY STIPULATED AND AGREED TO among the Plaintiff Semtech Corporation
(“Semtech”) and Defendants American Manufacturers Mutual Insurance Company
(“AMM”) and Lumbermens Mutual Casualty Company (“LMCC”) in this action, through
their designated counsel, that pursuant to FRCP 41(a)(1) the captioned matter
be, and is hereby dismissed with prejudice

24    25    26    27   

28    STIPULATION AND REQUEST FOR DISMISSAL WITH PREJUDICE OF ACTION AS BETWEEN
PLAINTIFF SEMTECH CORPORATION AND DEFENDANTS AMERICAN MANUFACTURES MUTAL
INSURANCE COMPANY AND LUMBERMENS MUTUAL CASUALTY COMPANY          

Case No.: CV 03-2460 GAF (PJWx)

    

 

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     Exhibit 1      1    as to AMM and LMCC only. These three parties have
entered into a confidential settlement resolving all issues. Each party is to
bear its own attorneys fees, costs and expert fees/costs. 2   

Date: July     , 2005

  

IRELL & MANELLA, LLP

3           4           5        

Attorneys for Plaintiff

6        

Semtech Corporation

7           8   

Date: July     , 2005

  

BARBER LAW GROUP

9           10        

Attorneys for Defendants

11        

American Manufacturers Mutual

Insurance Company and

Lumbermens Mutual Casualty

Company

12         13         14         15   

Good cause appearing, IT IS SO ORDERED.

     16    Date:                           , 2005      17         Honorable Gary
A. Feess 18        

United States District Court

19           20           21           22           23           24           25
          26           27          

28    STIPULATION AND REQUEST FOR DISMISSAL WITH PREJUDICE OF ACTION AS BETWEEN
PLAINTIFF SEMTECH CORPORATION AND DEFENDANTS AMERICAN MANUFACTURES MUTAL
INSURANCE COMPANY AND LUMBERMENS MUTUAL CASUALTY COMPANY          

Case No.: CV 03-2460 GAF (PJWx)

    

 

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