Document:

Settlement Agreement

 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 

  

 -1- 

 
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; 

  

 -3- 

 
(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,  

  

 -5- 

 
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

  

 -12- 

					
	 	  	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)
	  	 

  

 Page 1 

					
	 	  	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)
	  	 

  

 Page 22006 Profit Sharing Plan

 Exhibit 10.1 
  
 BLUE COAT SYSTEMS, INC. 
 2006 PROFIT SHARING PLAN 
  
 1. PURPOSES OF THE PLAN 
  
 1.1 The Blue Coat
Systems, Inc. 2006 Profit Sharing Plan (the “Plan”) is established to promote the interests of the Company and reward employees for the achievement of superior financial results. 
  
 2. ADMINISTRATION OF THE PLAN 
  
 2.1 The Compensation Committee of the Board of Directors of the Company (the
“Committee”) shall approve the Plan and adopt rules and regulations to implement the Plan. Decisions of the Committee shall be final and binding on all parties who have an interest in the Plan. 
  
 3. DETERMINATION OF PARTICIPANTS 
  
 3.1 An individual shall be eligible to participate in the Plan if he or she
is an Employee on the first day of the last month of the fiscal quarter. Payments to eligible employees who joined the company within the quarter will be pro-rated based on the number of days of employment, divided by the total days within the
quarter. 
  
 3.2 For purposes of the Plan: 
  
 (i) An individual shall be considered an
“Employee” as long as such individual remains employed by the Company or one or more of its Subsidiaries. Sales personnel on commission are excluded from the Plan 
  
 4. PROFIT SHARING AWARDS 
  
 4.1 The profit sharing plan is established as an incentive to achieve superior financial results. Profit sharing is applicable for fiscal quarters in
which the Net Profit After Tax (NPAT) exceeds 10%. For purposes of the profit sharing calculation, NPAT is calculated before expense, if any, required under the Plan. The Plan pays 20% of an individual’s target rate for each 1% of NPAT in
excess of 10%, such that 100% of an individual’s target is paid at NPAT of 15%. Target rates by level are 20% for Executives reporting directly to the Chief Executive Officer (Executives), 10% for Vice Presidents, Directors and Senior Managers
and 5% for all other employees. 
  
 4.2 The aggregate bonus pool
established by the formula set forth in Section 4.1 above shall be allocated among the eligible Employees in accordance with this Section 4.2. 
  
 A. Executives profit sharing payout at target is 20% of quarterly base pay. 

 B. Vice Presidents, Directors and Senior Managers profit sharing payout at target is 10%
of quarterly base pay. 
  
 C. All other employees
profit sharing payout at target is 5% of quarterly base pay. Sales personnel on commission are excluded from the Plan. 
  
 5. PAYMENT OF BONUS AWARDS 
  
 5.1 Profit sharing plan distributions are paid as follows: 40% of each fiscal quarter’s calculation is paid in the subsequent quarter, with the
remaining 60% deferred and paid out over the next four (4) quarters at 15% per quarter pending an individual’s continued employment. 
  
 6. GENERAL PROVISIONS 
  
 6.1 The Plan shall become effective when adopted by the Board of Directors. The Board of Directors may at any time amend, suspend or terminate the Plan,
provided it must do so in a written resolution and such action shall not adversely affect rights and interests of Plan participants to individual bonuses allocated prior to such amendment, suspension or termination. 
  
 6.2 No amounts awarded or accrued under this Plan shall actually be funded,
set aside or otherwise segregated prior to payment. The obligation to pay the bonuses awarded hereunder shall at all times be an unfunded and unsecured obligation of the Company. Plan participants shall have the status of general creditors and shall
look solely to the general assets of the Company for the payment of their bonus awards. 
  
 6.3 No Plan participant shall have the right to alienate, pledge or encumber his/her interest in this Plan, and such interest shall not (to the extent permitted by law) be subject in any way to the claims of the
Employee’s creditors or to attachment, execution or other process of law. 
  
 6.4 No action of the Company in establishing the Plan, no action taken under the Plan by the Committee and no provision of the Plan itself shall be construed to grant any person the right to remain in the employ of
the Company or its subsidiaries for any period of specific duration. Rather, each Employee will be employed “at will,” which means that either such Employee or the Company may terminate the employment relationship at any time for any
reason, with or without cause. Only the President has the authority to enter into an agreement on any other terms, and he or she can only do so in a writing signed by him or her. 
  
 6.5 This is the full and complete agreement between the eligible Employees and the Company on the terms described herein.

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