STIPULATION AND AGREEMENT OF SETTLEMENT

Exhibit 10.38

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

STIPULATION AND AGREEMENT OF SETTLEMENT

This Stipulation and Agreement of Settlement (the “Stipulation”) is submitted pursuant to Rules 23.1 of the Federal Rules of Civil Procedure. Subject to the approval of the Court, this Stipulation is entered into among Plaintiffs Michael Blizman, Nathan Hostacky, Michael Morris, and Phung Vu, derivatively on behalf of nominal defendant, Microtune, Inc. and on behalf of the Microtune Shareholders, Nominal Defendant Microtune, Inc. (“Microtune” or the “Company”) and Individual Defendants James A. Fontaine, James H. Clardy, William P. Tai, Harvey B. Cash, Walter S. Ciciora, Steven Craddock, Anthony J. LeVecchio (collectively, the “Director Defendants”), Douglas J. Bartek (“Bartek”), William Housley (“Housley”), Everett Rogers (“Rogers”), and Nancy A. Richardson (“Richardson”), by and through their respective counsel.

WHEREAS:

A. On and after October 30, 2003, the following derivative suits were filed in the U.S. District Court for the Eastern District of Texas against Microtune, as a nominal defendant, and certain of its present or former officers and directors: Morris v. Fontaine, et al. , 4:03-cv-0409; Hostacky v. Fontaine, et al. , 4:03-cv-0411; Vu v. Bartek, et al. , 4:03-cv-0471; and Blizman v. Bartek, et al. , 4:03-cv-0472.

B. By Orders dated December 29, 2003 and January 20, 2004, (the “Consolidation Orders”), the Court consolidated the four separately filed derivative actions listed above in paragraph A for all purposes into Morris v. Fontaine, et al., 4:03-cv-0409 (the consolidated

derivative suits hereafter referred to as the “Action”) and deemed the complaint in Morris v. Fontaine, et al . the operative complaint for the Action (“Derivative Complaint”). By Order dated January 20, 2004, the Court appointed Lerach Coughlin Stoia Geller Rudman & Robbins LLP (f/k/a Milberg Weiss Bershad Hynes & Lerach LLP) as Lead Counsel, and appointed the Provost Umphrey Law Firm and Federman & Sherwood as Co-Liaison Derivative Counsel.

C. The Derivative Complaint alleges claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, and disgorgement under the Sarbanes-Oxley Act of 2002.

D. The Derivative Complaint further alleges, among other things, that certain of the Individual Defendants engaged in wrongdoing in connection with Microtune’s accounting, auditing and financial reporting practices which resulted in the restatement of Microtune’s financial results for certain quarters in 2001 and 2002; sold personally-held Microtune stock at artificially inflated prices while in possession of material, non-public information; conducted inadequate due diligence prior to Microtune’s acquisition of Transilica Inc., which resulted in the write-down of goodwill and wireless intangibles; approved loans and incentive compensation to certain other Individual Defendants that have not been recovered; approved a severance package in connection with the resignation of one of the Individual Defendants that was improper and contrary to the best interests of Microtune; and that this and other allegedly improper conduct caused damage to Microtune and its shareholders.

E. On February 6, 2004, the Defendants moved to dismiss the Derivative Complaint. Plaintiffs filed their opposition to the motions to dismiss on April 8, 2004. The motions to dismiss are still pending.

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F. In July 2004, Microtune and Plaintiffs began settlement discussions and on December 13, 2004, mediated with Gary V. McGowan in a full-day mediation during which an agreement to settle all claims alleged in the Derivative Complaint was reached.

G. The Defendants (as hereinafter defined) deny any wrongdoing whatsoever, and this Stipulation shall in no event be construed or deemed to be evidence of, or an admission or concession on the part of, any Defendant with respect to any claim of any fault, liability, wrongdoing or damage whatsoever, or any infirmity in the defenses that the Defendants have asserted. The parties to this Stipulation recognize and acknowledge, however, that the Action is being voluntarily settled after advice of counsel and that the Settlement is fair, adequate, reasonable, and in the best interest of Microtune and the Microtune Shareholders. This Stipulation shall not be construed or deemed to be a concession by any Plaintiff of any infirmity in the claims asserted in the Action;

H. Plaintiffs’ Counsel have conducted an investigation relating to the claims and the underlying events and transactions alleged in the Derivative Complaint. Plaintiffs’ Counsel have analyzed the information learned during the investigation and have researched the applicable law with respect to the claims against the Defendants and the potential defenses thereto;

I. Plaintiffs, by their counsel, have conducted discussions and arm’s length negotiations with counsel for Defendants and have participated in a mediation before Gary V. McGowan with respect to a compromise and settlement of the Action against the Defendants with a view to settling the issues in dispute and achieving the best relief possible consistent with the interests of Microtune and its shareholders ; and

J. Based upon their investigation, Plaintiffs’ Counsel have concluded that the terms and conditions of this Stipulation are fair, reasonable and adequate to Plaintiffs, Microtune, and

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Microtune’s shareholders, and in their best interests, and Plaintiffs have agreed to settle the “Settled Claims” (as defined below), pursuant to the terms and provisions of this Stipulation, after considering (a) the substantial benefits that Microtune and its shareholders will receive from settlement of the Action, (b) the attendant risks of litigation, and (c) the desirability of permitting the Settlement (as hereinafter defined) to be consummated as provided by the terms of this Stipulation.

NOW THEREFORE, without any admission or concession on the part of Plaintiffs of any lack of merit of the Action whatsoever, and without any admission or concession of any fault, liability, wrongdoing or damage whatsoever, or lack of merit in the defenses whatsoever, by the Defendants, it is hereby STIPULATED AND AGREED, by and among the parties to this Stipulation, through their respective attorneys, subject to approval of the Court pursuant to Rule 23.1 of the Federal Rules of Civil Procedure, in consideration of the benefits flowing to the parties hereto from the Settlement, that all Settled Claims (as hereinafter defined) against the Released Parties (as hereinafter defined) and all Settled Defendants’ Claims (as hereinafter defined) shall be compromised, settled, released and dismissed with prejudice, upon and subject to the following terms and conditions:

CERTAIN DEFINITIONS

1. As used in this Stipulation, the following terms shall have the following meanings:

(a) “Defendants” means Microtune, the Director Defendants, Bartek, Housley, Rogers, and Richardson.

(b) “Defendants’ Counsel” means the law firms of Baker Botts L.L.P. and Siebman, Reynolds & Burg, LLP for Microtune; Thompson & Knight LLP for the Director Defendants; Haynes and Boone, LLP for Bartek; Akin Gump Strauss Hauer & Feld LLP for Housley; Carrington, Coleman, Sloman & Blumenthal, L.L.P. for Rogers; and Gray Cary Ware & Freidenrich LLP for Richardson.

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(c) “Effective Date of Settlement” or “Effective Date” means the date upon which the Settlement contemplated by this Stipulation shall become effective, as set forth in ¶ 12 below.

(d) “Insurance Carriers” means the insurance carriers that issued policies of directors and officers insurance to or on behalf of the Defendants covering the claims asserted in the Action, namely, Sheffield Insurance Company, Westchester Fire Insurance Company, and Greenwich Insurance Company, and including their directors, officers, employees, and attorneys.

(e) “Microtune Shareholders” means, for the purposes of this Stipulation only, the beneficial holders of Microtune stock as of the date this Stipulation is signed.

(f) “Notice Administrator” means Garden City Group, Inc..

(g) “Order and Final Judgment” means the proposed order to be entered approving the Settlement substantially in the form attached hereto as Exhibit B.

(h) “Plaintiffs” means the named plaintiffs in the four consolidated derivative actions, Michael Blizman, Nathan Hostacky, Michael Morris, and Phung Vu.

(i) “Plaintiffs’ Lead Counsel” means the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

(j) “Plaintiffs’ Counsel” means any counsel who have appeared on behalf of any of the Plaintiffs in the Action.

(k) “Plaintiffs’ Co-Liaison Counsel” means the Provost Umphrey Law Firm and Federman & Sherwood.

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(l) “Preliminary Order” means the proposed order preliminarily approving the Settlement and approving and directing notice of the Settlement to the Microtune Shareholders substantially in the form attached hereto as Exhibit A.

(m) “Released Parties” means any and all of the Defendants and the Insurance Carriers, their past, present or future subsidiaries, parents, successors and predecessors, including Transilica Inc., and any of their past, present or future officers, directors, agents, accountants, employees and attorneys, and any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any of the Defendants, and the legal representatives, heirs, successors in interest or assigns of any such party.

(n) “Settled Claims” means any and all claims, debts, demands, rights or causes of action or liabilities (including, but not limited to, any claims for damages, interest, attorneys’ fees, expert or consulting fees, and any other costs, expenses or liability), whether based on federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class, individual, or derivative in nature, including both known claims and Unknown Claims (as defined below), (i) that have been asserted in this Action by Plaintiffs or their attorneys or any of them against any of the Released Parties, or (ii) that could have been asserted in any forum by the Microtune Shareholders or their attorneys or any of them or the successors and assigns of any of them against any of the Released Parties which arise out of or are based upon or relate in any way to the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Derivative Complaint and which relate to the ownership of shares of the common stock of Microtune. “Settled Claims” does not include the claims asserted in the securities class action styled, Angeloni v. Microtune, Inc., et al. , Civil Action No. 4:03-cv-56, which are the subject of a separate settlement.

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(o) “Settled Defendants’ Claims” means any and all claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including both known claims and Unknown Claims, that have been or could have been asserted in the Action or any forum by the Defendants or any of them or the successors and assigns of any of them against any of the Plaintiffs, Microtune Shareholders, or their attorneys, which arise out of or relate in any way to the institution, prosecution, or settlement of the Action, except for claims to enforce the Settlement. The Settled Defendants’ Claims do not include any claims, rights or causes of action or liabilities arising out of or relating to any confidentiality, employment, severance, or other agreements between Microtune and any of the Microtune Shareholders.

(p) “Settlement” means the settlement contemplated by this Stipulation.

(q) “Settlement Notice” means the Notice of Proposed Settlement of Shareholder Derivative Action and Hearing, which is to be sent to the Microtune Shareholders substantially in the form attached hereto as Exhibit 1 to Exhibit A.

(r) “Unknown Claims” means any and all Settled Claims which any Plaintiff or Microtune Shareholder does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, and any Defendants’ Claims which any Defendant does not know or suspect to exist in his, her or its favor. With respect to any and all Settled Claims and Settled Defendants’ Claims, the parties stipulate and agree that upon the Effective Date, the Plaintiffs and the Defendants shall expressly, and each Microtune Shareholder shall be deemed

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to have, and by operation of the Order and Final Judgment shall have, expressly waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code § 1542,