Exhibit 10.21

 

CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE

 

This Confidential Settlement Agreement and Mutual Release (hereinafter
“Agreement”) is made as of this 28th day of December, 2005, by and between Evans
& Sutherland Computer Corp. (hereinafter collectively “E&S”) on the one hand,
and Federal Insurance Company (hereinafter “Federal”) on the other.  E&S and
Federal shall be referred to collectively as “Parties” and each will be referred
to singularly as “Party.”

 

WHEREAS, Federal issued to E&S General Liability insurance and Electronic and 
Information Technology Errors and Omissions insurance policy, number 3529-82-42,
effective April 1, 2000, through April 1, 2001, and a Federal Commercial
Umbrella policy, number 7966-15-50, effective April 1, 2000 through April 1,
2001 (the “Policies”); and

 

WHEREAS, Lockheed Martin filed suit on May 23, 2000 against E&S in Florida state
court, which case was removed to the U.S. District Court for the Middle District
of Florida and assigned Case No. 6:00-CV-755-ORL-19C (the “Lockheed Martin
Action”); and

 

WHEREAS, E&S tendered the Lockheed Martin Action to Federal and requested that
Federal defend and indemnify E&S in connection therewith under the Information
and Network Technology Errors or Omissions provisions and other relevant
provisions of the Policies; and

 

WHEREAS Federal defended E&S in the Lockheed Martin Action; and

 

WHEREAS E&S settled the Lockheed Martin Action on or about April 26, 2002 and
subsequently made a claim for indemnity to Federal for the value of E&S’
counterclaims that were dismissed  in settlement of the Lockheed Martin Action
as well as a claim for payment of certain attorneys’ fees and expenses incurred
by the law firms of Persons & Craver and Kirkland & Ellis;

 

WHEREAS, Federal denied the claim for indemnity and the claim for Kirkland &
Ellis attorneys’ fees and expenses under the Policies, and disputed coverage as
to the claims for both indemnity and fees and expenses on various grounds; and

 

WHEREAS, E&S filed a Complaint for Breach of Contract, Breach of the Implied
Covenant of Good Faith and Fair Dealing, and Declaratory Relief against Federal
in San Francisco Superior Court, case no. CGC 03419926, seeking an adjudication
that Federal was obligated to indemnify E&S with respect to the Lockheed Martin
Action and pay the Kirkland & Ellis fees and expenses; and

 

CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE

Evans & Sutherland Computer Corporation v. Federal Insurance Company, et al.

San Francisco Superior Court, Case No. CGC 03-419926

 

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WHEREAS, E&S tendered a claim to Federal in connection with a settlement E&S
reached with its customer, CAE, memorialized in a settlement agreement dated
March 11, 2000, and whereas E&S also tendered numerous other matters to Federal,
including, but not limited to, those arising out of the following contracts
and/or projects:

 

1.  Sea Harrier

2.  GR-4 Tornado

3.  Nimrod

4.  United Kingdom Attack Helicopter (UKAH)

5.  Common Visual System (CVS) (H-60 type helicopters)

6.  STN Atlas Elektronik GmbH, and

7.  8th Army

 

All claims and/or matters tendered by E&S to Federal including, but not limited
to, those listed above are collectively referred to herein as the “Tendered
Matters.”

 

WHEREAS, E&S and Federal have maintained and provided support for their
respective positions on the disputed questions of insurance coverage pertaining
to the Lockheed Martin  Action, Kirkland & Ellis fees and expenses and the
Tendered Matters, and to their respective rights and duties, if any, under and
because of the Policies; and

 

WHEREAS, E&S and Federal wish fully and finally to resolve, without admission or
adjudication of any issue of fact or law, all disputes that now exist or which
in the future may arise with respect to their respective rights and duties, if
any, under the Policies with respect to the Lockheed Martin Action, Kirkland &
Ellis fees and expenses and the Tendered Matters, and any other claims that
allege the same facts, circumstances and theories alleged to date;

 

NOW, THEREFORE, in consideration of and in reliance upon the definitions,
recitals, mutual promises, covenants and obligations, which are hereby
incorporated into this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, E&S and Federal agree as follows:

 

1.                                       DEFINITIONS

 

As used in this Agreement and for the purpose of this Agreement only, the
following terms have the following meanings:

 

1.1                                 “E&S” means Evans & Sutherland Computer
Corp. and its predecessors, successors, assigns, parent company(ies),
subsidiaries, affiliates, agents, servants, employees,

 

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managers, representatives, attorneys, officers, directors and shareholders, and
any and all other Persons who qualify as an (as herein defined) “insured” under
the Policies.

 

1.2                                 “Federal” means Federal Insurance Company,
its predecessors, successors, assigns, parent company(ies), subsidiaries,
affiliates, agents, servants, employees, managers, representatives, attorneys,
officers, directors and shareholders, and Chubb and Son, a division of Federal
Insurance Company.

 

1.3                                 “Person” means an individual, a corporation,
a partnership, an association, a proprietorship, a trust or any other entity or
organization, any federal, state or local governmental or quasi-governmental
body or political subdivision or any agency or instrumentality thereof.

 

1.4                                 Each term defined herein stated in a
singular form shall include the plural form, and each defined term stated in a
plural form shall include the singular form.

 

2.                                       PAYMENT

 

2.1                                 On or before December 30, 2005, or within
two (2) business days of the date E&S and its counsel execute this Agreement,
whichever is later, Federal shall pay to E&S the amount of EIGHT MILLION DOLLARS
($8,000,000.00), which payment shall constitute full and complete settlement of
all known, unknown and potential claims which E&S has or may have against
Federal with respect to the Lockheed Martin Action, Kirkland & Ellis fees and
expenses and the Tendered Matters, and any other claims alleging the same facts,
circumstances and theories alleged to date.

 

2.2                                 Such payment shall be made by wire transfer
to the following account:

 

Wells Fargo Bank

180 South Main

Salt Lake City, UT  84101

ABA:  121000248

Acct. No.:  4761055250

 

3.                                       DISMISSAL OF CLAIMS

 

E&S shall execute all documents necessary to effect the dismissal, with
prejudice, of its Action filed in the San Francisco Superior Court, Case No. CGC
03419926, which the Parties shall file promptly after payment of the settlement
specified in Paragraph 2 above.

 

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4.                                       RELEASES

 

4.1                                 Upon the condition precedent that Federal
makes the payment set forth in Paragraph 2 above, the Parties hereby forever
release, acquit, and discharge each other from any and all claims, demands,
duties, obligations, liabilities, damages, actions, and causes of action of any
kind or nature whatsoever, whether in contract, tort, or otherwise including any
claims of “bad faith” or breach of the implied covenant of good faith and fair
dealing, that each Party now has, had, or may have against the other Party with
respect to the Lockheed Martin Action, including, without limitation, any and
all claims between the Parties concerning Federal’s alleged but disputed
obligation to indemnify E&S for its settlement of the Lockheed Martin Action, to
pay the Kirkland & Ellis fees and expenses, and/or to contribute to any
settlement, or any make any other payments in connection with the Tendered
Matters

 

4.2                                 With respect to the Lockheed Martin Action
and the Tendered Matters released herein, the Parties agree that except as
otherwise indicated in this Agreement, this Agreement includes all claims of
every kind and nature, past and present, known or unknown, suspected or
unsuspected.  The Parties expressly waive the provisions of section 1542 of the
California Civil Code, which provides:

 

A general release does not extend to claims which 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 acknowledge that they have discussed with their legal counsel the
significance and effect of waiving Civil Code section 1542 and warrant that this
waiver is informed, knowing, and voluntary.  The Parties acknowledge and
understand that this waiver is an essential and material term of this Agreement
and that, without such waiver, the Parties would not have entered into this
Agreement.

 

5.                                       NO ADMISSION OF LIABILITY OR
RESPONSIBILITY

 

5.1                                 E&S and Federal agree that the payment and
acceptance of the settlement sum provided in Paragraph 2 and the additional
terms as set forth herein, and the execution of this Settlement Agreement, are
the result of a compromise of disputed claims, and shall never for any purpose
be considered an admission of liability or responsibility by E&S or Federal
concerning any of the claims referred to herein.  This Agreement  is entered
into without prejudice or precedential value and is not intended to be, nor
shall it be construed as, an interpretation of any insurance policy and shall
not be used as evidence or in any other manner in any court or dispute
resolution proceeding to create, prove or interpret the obligations and rights
of any party under or because of the Policies, other than in a proceeding to
enforce the terms of this Agreement.  Accordingly, neither this Agreement nor
its substance may be used between the Parties with respect to any other claim or
dispute that may exist between the Parties.  Furthermore, E&S and

 

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Federal deny all liability and intend merely to avoid further litigation, and no
past or present wrongdoing shall be implied by virtue of this Agreement or the
payment of the settlement sum and the fact of this settlement cannot be used as
a precedent in any other matter.

 

5.2                                 This Agreement shall not be admissible in
any legal proceeding except to enforce its terms.

 

6.                                       NO OTHER CLAIMS

 

Other than the Lockheed Martin Action, the Kirkland & Ellis fees and expenses
and the Tendered Matters, E&S warrants and represents that it is not aware of
any other claim(s) or potential claim(s) against E&S that give rise or may give
rise to any claim(s) by E&S for benefits under the Policies.  Further, E&S
hereby agrees that it will make no further claim of any kind to Federal for
benefits under the Policies.

 

7.                                       MERGER OF AGREEMENT

 

This Agreement is an integrated agreement and contains the entire agreement
regarding the matters herein between the signatories hereto.  No
representations, warranties or promises have been made or relied on by any
signatory hereto other than as set forth herein.  This Agreement supersedes and
controls any and all prior communications between the Parties or their
representatives relative to the matters contained herein.

 

8.                                       NO RIGHTS CONFERRED UPON NONPARTIES

 

This Agreement is intended to confer rights and benefits on the signatories
hereto only and is not intended to confer any right or benefit upon any other
Person.  No Person other than the signatories hereto shall have any legally
enforceable right under this agreement.  All rights of action for any breach of
this Agreement are hereby reserved to the signatories hereto.

 

9.                                       CONFIDENTIALITY

 

9.1                                 The amount of consideration paid by Federal
under this Agreement and the conditions of this Agreement shall remain strictly
confidential.  The Parties, their respective counsel and representatives shall
not disclose to any person in any context any of the terms or conditions of
this  Agreement, except as specifically follows:  In case of any subpoena or
other application for a court order to request the disclosure of any of the
terms or conditions of this Agreement, the Party shall, no less than fifteen
(15) days prior to any disclosure pursuant thereto, provide actual written
notice to the other as provided in Paragraph 14, in a manner so that it either
may seek to quash the subpoena or otherwise object to the disclosure order. 
Further, the Parties agree not to oppose any motion by one another requesting
that any such documents or

 

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information be produced only under seal of the court and pursuant only to a
reasonable protective order.

 

9.2                                 Nothing in these paragraphs shall preclude
E&S or Federal from sharing with their respective accountants or their other
paid tax preparers the amount of monies received pursuant to this Agreement for
the sole purpose of complying with duties and obligations owed to the United
States Internal Revenue Service and/or any and all state or local tax
authorities.

 

9.3                                 Nothing in these paragraphs shall preclude
E&S from making any disclosure of the settlement required by the Securities and
Exchange Commission and the laws and regulations pertaining to disclosures
required of publicly traded companies.  Notwithstanding any provision to the
contrary in this Settlement Agreement, Federal has relied on E&S’ Form 8-K
report dated December 30, 2005 regarding this settlement and the Parties agree
that it does not violate the confidentiality provisions of Paragraph 9 and its
subparts.

 

9.4                                 Nothing in these paragraphs shall preclude
Federal from making any disclosure of the settlement required by auditors,
reinsurers or regulators.

 

9.5                                 In the event that a Party, or any of its
attorneys or representatives, violates these confidentiality provisions, a
sanction may be imposed by the court upon the violator in breach of the
provision(s) for each and every instance of breach.

 

10.                                 CORPORATE REPRESENTATIONS OF THE PARTIES

 

The parties each represent and warrant to the extent applicable:

 

a.                                       That they are each corporations duly
organized and each validly existing in good standing under the laws of one of
the states of the United States;

 

b.                                      That they have taken all necessary
corporate and legal actions duly to approve the making and performance of this
Agreement and that no further corporate or other approval is necessary;

 

c.                                       That the making and performance of this
Agreement will not violate any provisions of law or of their respective articles
of incorporation or by-laws; and

 

d.                                      That they have read this Agreement and
know the contents hereof, that the terms hereof are contractual and not by way
of recital, and that they have signed this Agreement of their own free act.

 

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11.                                 BINDING NATURE OF TERMS

 

11.1                           Each of the terms of this Agreement is binding
upon each of the signatories hereto, their respective predecessors, successors,
transferees, assigns, representatives, principals, agents, officers, directors
and employees.

 

11.2                           If any provision of this Agreement or any portion
of any provision of this Agreement is declared null and void or unenforceable by
any court or tribunal having jurisdiction, then such provision or such portion
of such provision shall be considered separate and apart from the remainder of
this Agreement which shall remain in full force and effect.

 

12.                                 AUTHORIZATION OF SIGNATORIES

 

The signatories to this Agreement represent and warrant that they are duly
authorized to execute this Agreement on behalf of the corporation on whose
behalf they are signing, and to bind said corporations, to the terms,
conditions, provisions, duties, and obligations set forth in this Agreement.

 

13.                                 DISPUTE RESOLUTION AND CONSTRUCTION OF
CONTRACT

 

13.1                           Any dispute with respect to the enforcement of
this Agreement shall first be submitted to mediation pursuant to any method
mutually agreeable to the Parties.  Any Party requesting such mediation shall
provide to the other Party written notice of such request for mediation.  The
disputing Party shall make a good faith effort to try to resolve the dispute by
way of mediation.  Any Party has the right to institute legal proceedings, such
as filing a lawsuit, with respect to any such dispute, provided that at least
sixty (60) calendar days have expired since the date the written request for
mediation was received by the other Party.

 

13.2                           This Agreement shall be deemed to have been
entered into, and shall be construed and interpreted in accordance with the laws
of the State of California.  Any legal proceeding shall be filed in any court of
competent jurisdiction in the State of California.

 

14.                                 NOTICE

 

Any statements, communications or notices to be provided pursuant to this
Agreement shall be sent in writing to the attention of the persons indicated
below, via certified mail, electronic mail or facsimile, until such time as
notice of any change of person to be notified or change of address is forwarded
to all Parties:

 

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a.

Notice to Federal Insurance Company:

 

 

 

Ms. Cynthia Hagedorn

 

Chubb Group of Insurance Companies

 

3090 Bristol St., Ste. 600

 

Costa Mesa, CA 92626

 

Fax: (714) 913-4991

 

E-mail: chagedorn@chubb.com

 

 

 

With a copy to:

 

 

 

Marjie D. Barrows, Esq.

 

Rudloff Wood & Barrows LLP

 

2000 Powell Street, Suite 900

 

Emeryville, California 94608

 

Fax: (510) 740-1501

 

E-mail: mbarrows@rwblaw.com

 

 

b.

Notice to E&S:

 

 

 

Mr. David Bateman

 

V.P., Business Operations

 

Evans & Sutherland Computer Corporation

 

600 Komas Drive

 

Salt Lake City, UT 84108

 

E-mail: dbateman@es.com

 

 

 

With a copy to:

 

 

 

Philip L. Pillsbury, Jr., Esq.

 

Pillsbury & Levinson, LLP

 

The Transamerica Pyramid

 

600 Montgomery Street, 31st Floor

 

San Francisco, CA 94111

 

Fax: (415) 433-4816

 

E-mail: ppillsbury@pillsburylevinson.com

 

 

 

15.                                 NO FURTHER PAYMENT

 

Except as otherwise indicated in this agreement, apart from the payment made
under this Agreement, each Party will bear its own costs, expenses, damages, and
attorneys’ fees incurred in or arising out of or in any way related to the
matters released herein.

 

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16.                                 INFORMED NEGOTIATIONS

 

This Agreement is the product of informed negotiations between the Parties and
their representatives, including counsel.  It is agreed that all Parties shared
equally in drafting the same and that no Party shall be considered the sole
drafting party.  It is further agreed that the rule of interpreting ambiguities
against the drafting party shall not apply to the interpretation of this
Settlement Agreement.

 

17.                                 WAIVER AND AGREEMENT

 

No provision of this Agreement, or breach of any provision, can be waived except
in writing.  Waiver of any provision or breach shall not be deemed to be a
waiver of any other provision or of any subsequent breach of the same or other
provision.  This Agreement may be amended, modified, or rescinded only in
writing signed by the Party to be charged.

 

18.                                 MISCELLANEOUS

 

18.1                           All headings contained herein are only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.

 

18.2                           This Agreement may be executed in counterparts,
all of which together shall constitute a single instrument.

 

In Witness Whereof, the Parties have signed this Agreement below by their duly
authorized representative.

 

THE UNDERSIGNED HAVE READ THE FOREGOING SETTLEMENT AGREEMENT AND RELEASE, FULLY
UNDERSTAND ITS TERMS AND AGREE TO IT.

 

 

DATED: December 28, 2005

Evans & Sutherland Computer Corp.

 

 

 

 

 

By:

  /s/David H. Bateman

 

 

 

 

 

 

Name:

David H. Bateman

 

 

 

 

 

Title:

V.P., Business Operations

 

 

 

 

 

 

 

 

 

 

DATED: December 28, 2005

Pillsbury & Levinson, LLP

 

 

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Attorneys for Evans & Sutherland Computer Corp.

 

 

 

 

By:

  /s/ Philip L. Pillsbury, Jr.

 

 

 

Philip L. Pillsbury, Jr.

 

 

 

 

 

 

 

DATED: December 29, 2005

Federal Insurance Company

 

 

 

 

 

By:

  /s/ Donna Lombardi

 

 

 

 

 

Name:

  Donna Lombardi

 

 

 

 

 

Title:

  VP & Claim Counsel

 

 

 

 

 

 

 

DATED: December 29, 2005

Rudloff Wood & Barrows LLP

 

 

Attorneys for Federal Insurance Company

 

 

 

 

 

By:

  /s/ Marjie D. Barrows

 

 

 

Marjie D. Barrows

 

 

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