On August 17, 2010, Blue Coat Systems Inc., Blue Coat's former executives and Ernst & Young LLP settled two shareholder derivative lawsuits: In re Blue Coat Systems, Inc. Derivative Litigation, Case No. 06-cv-03484-JF, filed on August 6, 2006 in the Northern District of California (Complaint) and In re Blue Coat Systems, Inc. Derivative Litigation, Case No. 1:06-cv-064854, filed on May 5, 2005 in the Superior Court of the State of California for the County of Santa Clara. Based on purported backdating of stock options at Blue Coat between 1999 and 2006 and alleged insider trading in 2004, in their federal derivative action on behalf of Blue Coat, plaintiffs asserted violations of the California Corporation Code, federal securities laws, and a variety of common law against EY and Blue Coat's former executives. Plaintiffs' claims in the state derivative suit were based on the same allegations.

Under the terms of the settlement, the former executives agreed to pay Blue Coat over $4 million, and Blue Coat agreed to issue a certain amount of shares of its common stock, which is valued at nearly $1.8 million, to reimburse counsel's fees and costs. As part of the settlement, Blue Coat also agreed to adopt a number of corporate governance changes.