Document:

Settlement Agreement bet. US Govt., Dept. of Defense & UTC Corp dated 6/5/2006

 Exhibit 10.1 
 SETTLEMENT AGREEMENT 
 This Settlement Agreement (the “Agreement”) is hereby made effective on June 5,
2006 (“Effective Date”) between the United States Government, Department of Defense, Defense Contract Management Agency, acting by and through the Divisional Administrative Contracting Officer executing this Agreement, (hereinafter
“the Government” or “DACO”), and United Technologies Corporation, acting by and through its Pratt & Whitney division (hereinafter “UTC,” “Pratt” or “the Company”). 
 WHEREAS, the Company has entered into a series of agreements with foreign firms relating to development and manufacture of jet engines and spare parts for commercial
engine programs such as the PW2000, PW4000, JT8D, PW6000, GP7000 and V-2500, referred to as “Collaboration Agreements;” and 
 WHEREAS, the Company
and the Government (jointly “Parties”) have entered into Contract No. F33657-84-C-2263 and other government contracts subject to the Cost Accounting Standards (“CAS”); and 
 WHEREAS, Contracting Officers James F. Swift, William Morrow, and Alan R. Tinti, respectively, have issued a Final Finding of Noncompliance dated January 24, 1992,
and Final Decisions dated December 2, 1996, and November 24, 2003 (collectively the “Final Decisions”), concluding that Pratt’s accounting treatment of Collaboration Agreements did not comply with CAS 410, 418, and 420 and,
in the 2003 Final Decision, have demanded payment of $754,682,978 covering the alleged total cost impact to government contracts through 2002 plus statutory interest for the period 1984 through 2001, such decisions and claims having been extended to
assert that the period of the CAS noncompliance extended through December 31, 2004 and that the Government is entitled to interest accruing to the Effective Date (collectively “Government Claim”); and 
 WHEREAS, the Company appealed from the Final Decisions, which appeals were filed with respect to Contract No. F33657-84-C-2263 and other CAS-covered contracts and are
now pending before the Armed Services Board of Contract Appeals and docketed as ASBCA Nos. 47416, 50453, and 54512; and 
 WHEREAS, on May 24, 2004, the
Company submitted its cost impact proposal respecting the CAS non-compliances asserted in the Final Decisions and at issue in ASBCA Nos. 47416, 50453, and 54512; and 
 WHEREAS on July 27, 2004, the Company noticed an appeal alleging a deemed denial of the cost impact component of its May 24, 2004 submission to the DACO and that appeal was docketed as ASBCA No. 54692
(together with the ASBCA Nos. 47416, 50453, and 54512, hereinafter “the Appeals”); and 
 WHEREAS, with respect to various final negotiated
indirect cost rates and forward pricing rate agreements, the Government and Pratt have entered into a series of savings agreements that, among other things, contain provisions preserving both parties’ rights to reopen such rate agreements
depending on the outcome of the Appeals (hereinafter the “Savings Agreement Collaboration Provisions”); and 
 WHEREAS, effective January 1,
2005 and forward, Pratt changed its U.S. Government contract cost accounting practices for commercial Collaboration Agreements; and 
 WHEREAS, the
undersigned DACO is authorized under relevant law and regulations and any applicable delegations of authority to resolve on behalf of the Government all disputes, claims, issues, and disagreements relating to the Final Decisions, the Government
Claim, the Appeals, and the Savings Agreement Collaboration Provisions; and 
 WHEREAS, the Parties have determined that it is in their best interests to
settle all matters in dispute under the Final Decisions, the Government Claim, the Appeals, and the Savings Agreement Collaboration Provisions: 
 NOW,
THEREFORE, in consideration of the premises above stated, mutual promises and agreements of the Parties hereto, each to the other, and other valuable consideration, the parties, intending to be legally bound, hereby agree as follows: 
 1. Within five (5) business days of the Effective Date the parties will jointly move to dismiss the Appeals with prejudice, subject to reinstatement after the
granting of such motion should the provisions of this Agreement not be met. 
 2. In full and final Settlement of the Final Decisions, Government Claim, the
Savings Agreement Collaboration Issues, and the Appeals, Pratt agrees to pay the Government $283,000,000, (“Settlement 

  

 37 

 
Amount”), said amount consisting of $173,700,000 of principal and $109,300,000 of interest through the Effective Date. Pratt shall make payment in
accordance with the schedule set forth below: 
 Within thirty (30) days of the Effective Date, Pratt shall pay: $30,000,000. 

By December 31, 2006, Pratt shall pay: the remaining principal and accrued interest 
 The proceeds of the first payment under the above schedule shall be applied first to the interest portion of the $283,000,000 settlement amount and thereafter will be
applied to reduce the principal portion of the settlement amount. Interest shall continue to accrue on the unpaid principal portion of the settlement amount at the rate prescribed under section 6621(a)(2) of the Internal Revenue Code of 1986, as
amended (26 U.S.C. 6621(a)(2)) until the settlement amount is paid in full.1 Pratt may at its option and at any time
prepay all or any part of the remaining principal and accrued interest. Such payments shall also be applied first to interest and thereafter to the reduction of principal. 
 3. The parties agree that UTC’s payments under the schedule stated in paragraph 2 fully and finally resolve the Final Decisions and the Government Claim, and that, accordingly, neither party will exercise its
rights under the Savings Agreement Collaboration Provisions; 
 4. Upon receipt of the full Settlement Amount in accordance with paragraph 2 of this
Agreement, the Government to the extent permitted by law hereby fully and forever, permanently and unconditionally, releases, extinguishes and discharges the Company and its past, present and future parents, subsidiaries, affiliates, predecessors,
successors and assigns, and their directors, officers, employees, shareholders, agents, representatives, attorneys, heirs, executors, administrators, predecessors, successors and assigns, of and from any and all claims, disputes, demands, interest
and damages of whatever kind, asserted or unasserted, known or unknown arising out of or relating in any way to the issues addressed in the Final Decisions, the Government Claim, the Appeals, the Savings Agreement Collaboration Provisions, including
not only claims actually asserted but those that could have been asserted in the Final Decisions, Government Claim and the Appeals with respect to Pratt’s U.S. Government contract cost accounting treatment of Collaboration Agreements.

 5. Simultaneously with the Government’s release of Pratt, Pratt similarly fully and forever, permanently and unconditionally releases, extinguishes
and discharges the Government, its officers, agents and employees of and from any and all civil liabilities, obligations, claims, appeals, demands, interest and damages of any kind, whether known or unknown, asserted or unasserted, administrative or
judicial, legal or equitable arising under or related in any way to the Appeals (ASBCA Nos. 47416, 50453, 54512 and 54692 under Contract Nos. F33657-84-C-2263 et al), including not only claims actually asserted by Pratt but also those that could
have been asserted by Pratt in said Appeals with respect to Pratt’s U.S. Government contract cost accounting treatment of Collaboration Agreements. 
 6. The parties hereto expressly recognize that this Settlement Agreement is entered into in accord and satisfaction of contested matters, as described above, and that the agreements described above do not represent an admission of liability
or responsibility on the part of the Company or the Government. 
 7. This Settlement Agreement shall extend to and be binding upon the parties hereto and
their respective agents, successors, and assigns. 
 8. Any disagreement or dispute that relates to this Settlement Agreement shall be a dispute under the
Contract Disputes Act of 1978, Pub. L. No. 95-563, 41 U.S.C. 601-613. 
 9. Pratt agrees that the costs of defending and appealing the Government claims
asserted in the Final Decisions of January 24, 1992, December 2, 1996, November 24, 2003, and the alleged deemed denial that is the subject of ASBCA No. 54692 and the costs of prosecuting any counterclaims brought
incident to the Appeals are unallowable under FAR 31.205-47(f)(1). 
 10. This Agreement is the entire agreement between the Parties, and supercedes any
prior agreements, whether oral or written, relating to the subject matter hereof. This Agreement may not be altered, amended, modified, or otherwise changed except by a writing duly executed by both Parties. 
  

	1	For example, since the rate prescribed by the Secretary of the Treasury under Section 6621(a)(2) for the second quarter of 2006 is 7%, Pratt would be liable for
a daily interest accrual of $33,312.33 through June 30, 2006. After June 30, 2006, this daily interest accrual will change as the principal balance is reduced and/or the interest rate established pursuant to Section 6621(a)(2) is
changed. 

  

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 IN WITNESS WHEREOF, the parties hereto, by and through their duly authorized representatives, have executed this
Settlement Agreement in two (2) counterparts, each of which shall be deemed an original. 
  

					
	 United States Government,
 Department of
Defense
	 		 	 Pratt & Whitney Division,
 United Technologies
Corporation

			
	 /s/ Eileen Ennis
	 		 	 /s/ Donald E. Nichols

	Eileen Ennis	 		 	Donald E. Nichols
			
	Divisional Administrative Contracting Officer APO Pratt & Whitney	 		 	Controller, Military Engines
			
	Dated: 6/5/06	 		 	Dated: 6/5/06

  

 39Form of Stock Option Agreement dated March 17,2004

 Exhibit 4.1 
 FORM OF STOCK OPTION AGREEMENT 
 This STOCK OPTION AGREEMENT (the
“Agreement”) is entered into on March 17, 2004 between Vimicro International Corporation (the “Company”), a company established and existing under the laws of the Cayman Islands, and
                         (the “Optionee”). 
 WHEREAS, Vimicro Corporation (“Vimicro Beijing”), a company established and existing under the laws of the People’s Republic
of China, previously committed to grant certain stock options (the “Option”) to the Optionee covering              shares of Vimicro Beijing’s common stock at
an exercise price of            per share, and otherwise on terms and conditions mutually agreed upon by Vimicro Beijing and the Optionee; 
 WHEREAS, Vimicro Beijing has become a directly wholly-owned subsidiary of the Company through a corporate reorganization consummated on
May 17, 2004 (the “Reorganization”); 
 WHEREAS, in connection with the Reorganization, the Company has assumed
all the commitments of Vimicro Beijing to grant stock options; 
 WHEREAS, the Company and the Optionee desire to enter into this
Agreement to memorialize, affirm and ratify the material terms of the Option agreed to be granted by Vimicro Beijing to the Optionee and now assumed by the Company. 
 NOW THEREFORE, the parties hereby agree, acknowledge and affirm that the terms of the Option are as follows: 
  

	1.	PRINCIPAL TERMS 

  

					
	Name of the Optionee:	  	  
	  	
			
	Address of the Optionee:	  	  
	  	
			
	Date of Grant:	  	2004.03.17	  	
			
	Vesting Commencement Date:	  	  
	  	
			
	Total Number of Ordinary Shares Granted:	  	             shares	  	
			
	Exercise Price per Ordinary Share:	  	             per share	  	
			
	Term/Expiration Date:	  	2014.03.17	  	

					
	Exercise and Vesting Schedule:	  	The shares (the “Shares”) subject to this Option shall vest according to the following schedule:
		
		  	20% of the Shares subject to the Option (rounded down to the next whole number of shares) shall vest on the first anniversary of the Vesting Commencement Date, and 10% of the shares
vest monthly thereafter over the next four years so that all of the Shares subject to the Option shall vest on the fifth anniversary of the Vesting Commencement Date.
		
	Termination Period:	  	This Option may be exercised for 30 days after the Optionee ceases to be an employee of the Company or any of its subsidiaries (the “Service Provider”), or such
longer period as may be applicable upon the death or disability of the Optionee as provided herein, but in no event later than the Term/Expiration Date as provided above.

  

	2.	OTHER TERMS AND AGREEMENTS 

  

	2.1	Exercise of Option. The Option is exercisable as follows: 

  

	 	(a)	Right to Exercise. 

  

	 	(i)	This Option shall be exercisable cumulatively according to the vesting schedule set out in this Agreement. For purposes of this Option Agreement, Shares subject to this Option shall
vest based on the Optionee’s continued status as a Service Provider. 

  

	 	(ii)	This Option may not be exercised for a fraction of a Share. 

  

	 	(iii)	In the event of the Optionee’s death, disability or other termination of the Optionee’s status as a Service Provider, the exercisability of the Option is governed by
Sections 2.6, 2.7 and 2.8 below. 

  

	 	(iv)	In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 1 of this Agreement. 

  

	 	(b)	Method of Exercise. This Option shall be exercisable by delivery of the executed Exercise Notice (the “Exercise Notice”), in the form attached as Exhibit A,
to the Company. This Option shall be deemed to be exercised upon receipt by the Company of such Exercise Notice, accompanied by the Exercise Price and payment of any applicable withholding tax. 

  

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	 	  	No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with all relevant provisions of law and the requirements of any stock
exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.

  

	2.2	Optionee’s Representations. If the Shares purchasable pursuant to the exercise of this Option have not been registered under the U.S. Securities Act of 1933, as amended
(the “Securities Act”), at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her investment
representations as required by the Company. 

  

	2.3	Lock-Up Period. The Optionee hereby agrees that if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in
connection with any registration of the offering of any securities of the Company under the Securities Act, the Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such longer
period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. 

 

	2.4	Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee, subject to the approval by the
Company’s designated option administrator or the option administrative committee (the “Administrative Committee”): 

  

	 	(a)	cash, 

  

	 	(b)	check payable to the order of the Company, 

  

	 	(c)	promissory note, 

  

	 	(d)	other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, 

  

	 	(e)	consideration received by the Company under a cashless exercise program implemented by the Company, or 

  

	 	(f)	any combination of the foregoing methods of payment. 

  

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	  	In making its determination as to the type of consideration to accept, the Administrative Committee shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company. 

  

	2.5	Restrictions on Exercise. If the issuance of Shares upon such exercise or if the method of payment for such shares would constitute a violation of any applicable laws, then
the Option may not be exercised. The Company may require the Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation before allowing the Option to be exercised. 

 

	2.6	Termination of Relationship. If the Optionee ceases to be a Service Provider (other than by reason of the Optionee’s death or the total and permanent disability of the
Optionee), the Optionee may exercise this Option during the Termination Period set out in Section 1 of this Agreement, to the extent the Option was vested at the date on which the Optionee ceases to be a Service Provider. To the extent that the
Option is not vested at the date on which the Optionee ceases to be a Service Provider, or if the Optionee does not exercise this Option within the time specified herein, the Option shall terminate. 

  

	2.7	Disability of the Optionee. If the Optionee ceases to be a Service Provider as a result of his or her total and permanent disability, the Optionee may exercise the Option to
the extent the Option was vested at the date on which the Optionee ceases to be a Service Provider, but only within three months from such date (and in no event later than the expiration date of the term of this Option as set forth in Section 1
of this Agreement). To the extent that the Option is not vested at the date on which the Optionee ceases to be a Service Provider, or if the Optionee does not exercise such Option within the time specified herein, the Option shall terminate.

  

	2.8	Death of the Optionee. If the Optionee ceases to be a Service Provider as a result of the death of the Optionee, the vested portion of the Option may be exercised at any time
within three months following the date of death (and in no event later than the expiration date of the term of this Option as set forth in this Agreement) by the Optionee’s estate or by a person who acquires the right to exercise the Option by
bequest or inheritance. To the extent that the Option is not vested at the date of death, or if the Option is not exercised within the time specified herein, the Option shall terminate. 

  

	2.9	Non-Transferability of Option. This Option may not be transferred in any manner except by will or by the laws of descent or distribution. It may be exercised during the
lifetime of the Optionee only by the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 

  

	2.10	Term of Option. This Option may be exercised only within the term set out in Section 1 of this Agreement. 

  

	2.11	Restrictions on Shares. The Optionee hereby agrees that Shares purchased upon the exercise of the Option shall be subject to such terms and conditions as the Administrative
Committee shall determine in its sole discretion, including, without limitation, restrictions on the transferability of Shares, the right of the Company to repurchase Shares, and a right of first refusal in favor of the Company with respect to

  

 4 

	  	permitted transfers of Shares. Such terms and conditions may, in the Administrative Committee’s sole discretion, be contained in the Exercise Notice with respect to the Option
or in such other agreement as the Administrative Committee shall determine and which the Optionee hereby agrees to enter into at the request of the Company. 

  

	2.12	Governing Law. This Exercise Notice shall be construed and governed by the laws of New York, U.S.A. 

  

	2.13	Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by the Optionee or by the Company forthwith to the Administrative
Committee which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrative Committee shall be final and binding on all parties. 

  

	2.14	Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supercedes in their entirety all prior
undertakings and agreements of the Company or any of its affiliates and the Optionee with respect to the subject matter hereof. 

 (Signature page to follow) 
  

 5 

 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and
all of which shall constitute one document. 
  

			
	VIMICRO INTERNATIONAL
	CORPORATION
		
	By:	 	  

	Name:	 	
	Title:	 	Director

 THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER
UPON THE OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH THE OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE OPTIONEE’S EMPLOYMENT OR
CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. 
 The Optionee has reviewed this Option in its entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all provisions of the Option. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrative Committee upon any
questions arising under this Option. 
  

					
	Dated:                     	 		 	  

		 		 	OPTIONEE

  

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