Exhibit 10.8


 


SETTLEMENT AGREEMENT


 


This Settlement Agreement (“Agreement”) is by and between Innovative
Solutions and Support, Inc. (referred to herein as “IS&S”), which is
incorporated under the laws of the State of Pennsylvania, with a principal
place of business at 720 Pennsylvania Drive, Exton, Pennsylvania, and Kollsman, Inc.
(referred to herein as “Kollsman”), which is incorporated under the laws of
Delaware, with a principal place of business at 220 Daniel Webster Highway,
Merrimack, New Hampshire.


 


RECITALS


 


A.                                   IS&S and Kollsman have been engaged in
litigation in the United States District Court for the Western District of
Tennessee (Civil Action No. 05-2665-MI P) (referred to herein as the
“Lawsuit”), relating to IS&S’ claims for misappropriation of trade secrets
and patent infringement.


 


B.                                     The jury has returned a verdict in favor of
IS&S, and the United States District Court for the Western District of
Tennessee has issued certain rulings relating to the award of exemplary
damages, attorneys’ fees, and prejudgment interest, and entered permanent and
head start injunctions against Kollsman.


 


C.                                     IS&S has asserted a claim in the Lawsuit
against Kollsman for infringement of U.S. Patent No. 6,584,839 (the “839
Patent”), which claim was stayed pending reexamination. Kollsman has asserted
counterclaims for non-infringement, invalidity, and unenforceability of the
‘839 Patent.


 


D.                                    IS&S and Kollsman desire to compromise
the above claims and to enter into a settlement agreement on the terms set
forth in this Agreement.


 


NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter contained, the parties agree as follows.


 


1.                                       DEFINITIONS


 


As used herein, capitalized terms not otherwise defined herein shall
have the following meanings:


 


1.1                                 “Change of Control” with respect to IS&S
or Kollsman, as the case may be (referred to for convenience in this Section as
the “affected party”), means a transaction or series of related transactions in
which (1) any Person is or becomes the beneficial owner, directly or indirectly,
of more than fifty percent (50%) of the voting securities of the affected
party; or (2) a merger or consolidation of the affected party or any
direct or indirect subsidiary of the affected party is consummated with any other
Person wherein the voting securities of the affected party outstanding
immediately prior to such merger or consolidation represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) less than 50% of the voting securities
of the affected party or such surviving entity or


 


Confidential


 


1

















 


any parent thereof outstanding
immediately after such merger or consolidation; or (3) an agreement for
the sale or disposition by the affected party of more than 50% of the affected
party’s assets. However, no transaction will be considered to constitute a
Change of Control with respect to a party if under said transaction the
ultimate parent company of the respective party remains the same as its
ultimate parent company on the Execution Date of this Agreement.


 


1.2                                 “Control” (including
the terms “Controlling,” “Controlled by” and “under common Control with”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting shares or of other voting rights entitled to elect
directors or other managing authority, by contract, or otherwise, except that
ownership of less than twenty percent (20%) of the voting shares or of other
voting rights entitled to elect directors or other managing authority for such
Person or rights to fifty percent (50%) or less of the profits and losses of
such Person shall conclusively be deemed not to constitute “Control” (or the
terms “Controlling,” “Controlled by” and “under common Control with”) as
defined herein.


 


1.3                                 “Court” means the
United States District Court for the Western District of Tennessee.


 


1.4                                 “Effective Date” means
the date upon which IS&S receives the payment described in Section 8.1.


 


1.5                                 “Execution Date”
means the date upon which this Agreement becomes signed by all parties.


 


1.6                                 “Injunction” means the
Order entering permanent and head start injunctions against Kollsman and in
favor of IS&S dated June 30, 2008.


 


1.7                                 “Consent Order” means
the document attached hereto as Exhibit A, which will be filed with the
Court in two versions, (1) a redacted version as shown and (2) an
unredacted version in which the redacted portions will correspond to the
redacted portions in the Injunction and which the parties will request to
remain sealed by the Court.


 


1.8                                 “Person” means an
individual, trust, corporation, partnership, joint venture, limited liability
company, association, unincorporated organization
or other legal or governmental entity.


 


1.9                                 “Settlement Payment” shall mean the
payment described in Section 8.1 of this Agreement.


 


1.10                           “Trade Secrets” means the
trade secrets that the jury in the Lawsuit found Kollsman had misappropriated.


 


2

















 


2.                                       DISMISSALS,
RELEASES, AND CONDUCT AGREEMENTS


 


2.1                                 In consideration of
the mutual promises set forth herein, within two (2) business days of the
Execution Date, IS&S and Kollsman shall jointly file with the Court a
motion and proposed order for entry of the Consent Order attached as
Exhibit A. To the extent the consent of other parties to the Lawsuit is
necessary to effectuate the entry of the Consent Order, IS&S and Kollsman
agree jointly to seek such consent. Should the Court refuse to enter the
Consent Order in the form attached as Exhibit A or in a form that is
mutually acceptable to the parties, IS&S will not be entitled to the
Settlement Payment, and the parties will have no further obligation under this
Agreement, which shall be null and void.


 


3.                                       MUTUAL RELEASE OF
CLAIMS


 


3.1                                 Effective upon
receipt by IS&S of the Settlement Payment described below and subject to
the Consent Order and to their obligations herein, the parties hereby release
and forever discharge each other and their past and present directors,
managers, officers, and employees, parents, subsidiaries, partners, joint
venturers and affiliated entities and each of them, separately and
collectively, from any and all claims, liens, demands, causes of action,
obligations, damages, and liabilities of any nature whatsoever, whether known
or unknown and now existing, arising out of actions or inactions of any kind
from the beginning of time through the Effective Date of this Agreement that
are based upon the claims and counterclaims brought in the Lawsuit or arise out
of the same allegations asserted in the Lawsuit (the “Released Claims”).


 


4.                                       NO SETTLEMENT,
RELEASE, OR DISMISSAL OF CLAIMS AGAINST OTHER DEFENDANTS


 


4.1                                 This Agreement,
including the release of Kollsman herein, is made in good faith based upon good
and valuable consideration given to IS&S. Subject to the terms of this
Agreement above, nothing in this Agreement will be construed to release or
reduce any claim, cause of action, or judgment IS&S has or may have against
any person, entity, or individual that is not a party to this Agreement.
Specifically, this Agreement will not be construed to release or reduce any
claim, cause of action, or judgment IS&S has or may have against
J2, Inc. or its subsidiaries, affiliates, or successors in interest;
ZTI, Inc., or its subsidiaries, affiliates, or successors in interest;
Strathmann & Associates, or its subsidiaries, affiliates, or
successors in interest; Joseph Caesar;
James Zachary; Steven Tomlinson; or Frederick Strathmann.


 


4.2                                 The parties agree
that for solely for purposes of T.C.A. 29-11-105, and without any admission of
liability whatsoever by Kollsman, in connection with the enforcement of any
award against the remaining defendants, the Settlement Payment will be
apportioned so as to provide the maximum available award against the remaining
defendants. Nothing in this Agreement shall release J2, Inc., Joe Caesar,
James Zachary or Zachary Technologies, Inc. (the “J2 Defendants”) from
satisfying their responsibilities, obligations and indebtedness for any
compensatory damages award, the attorneys’ fees award, or the pre-judgment
interest award pursuant to the Court’s rulings in the Lawsuit. Finally, the
parties acknowledge that the Settlement Payment by Kollsman is not a payment or
satisfaction of any claims, judgments,


 


3

















 


orders or rulings rendered against any of the
J2 Defendants, including any such claims, judgments, orders, or rulings
rendered solely against any of the J2 Defendants.


 


5.                                       CONDUCT REGARDING FUTURE PRODUCTS


 


5.1                                 As an integral part of this Agreement,
Kollsman agrees to abide by the restrictions in the Consent Order with respect
to future products.


 


5.2                                 As a further integral part of this Agreement,
Kollsman shall be granted a limited, royalty-free license to use the Trade
Secrets as necessary to repair and return to service any previously sold air
data computer model numbers 24471, 50042, or 49970 or parts or attachments
previously sold with such air data computers. In connection with such repairs, Kollsman
agrees that the Kollsman personnel performing such repairs will only be
provided the Trade Secrets on a need-to-know basis and only to the extent necessary
to perform such repairs and will maintain necessary and sufficient safeguards
so that Trade Secrets are not disclosed to others who are not performing such
repairs. The Trade Secrets shall not be used for other purposes.


 


5.3                                 As a further integral part of this Agreement,
Kollsman agrees and acknowledges that any violation of the provisions of this
section shall be deemed to cause irreparable harm, entitling IS&S to
injunctive relief to halt any such breaches.


 


6.                                       NO ADMISSION OF LIABILITY


 


6.1                                 The parties agree that the settlement of the
Lawsuit is intended solely as a compromise of disputed claims. Neither the fact
of a party’s entry into this Agreement nor the terms hereof nor any acts
undertaken pursuant hereto shall constitute an admission or concession by any
party relating to liability or the validity of any claim, counterclaim, or
defense in the Lawsuit.


 


7.                                       COSTS AND EXPENSES


 


7.1                                 Except as expressly provided herein, as
between the parties to this Agreement, each party shall be responsible for and
shall pay its own attorneys’ fees and costs incurred in connection with the
Lawsuit, the settlement of the Lawsuit, and the preparation and execution of
this Agreement, and the dismissals.


 


8.                                       PAYMENTS


 


8.1                                 Settlement Amount


 


8.1.1                        In consideration of the rights granted
herein, upon execution of this Agreement, Kollsman will deposit by wire
transfer $17,000,000.00 (Seventeen Million and No/100 US Dollars) with
Greenberg Traurig, LLP as escrow agent. Within one (1) business day after the
entry by the Court of the Consent Order described above and in the form
requested by


 


4

















 


the parties and
after IS&S has provided an executed IRS Form W-9 to the escrow agent,
the escrow agent shall transfer to IS&S such Settlement Payment, which
payment shall be nonrefundable and irrevocable. Should the Court not enter the
Consent Order in the form requested by the parties or such other form as is
mutually acceptable to the parties, the escrow agent shall return the Settlement
Payment to Kollsman and this Settlement Agreement shall be null and void.


 


8.2                                 Payment
Instructions


 


8.2.1                        Kollsman will make
the Settlement Payment under this Agreement to Greenberg Traurig, LLP by wire
transfer to:


 


	
  Beneficiary:

  	
   

  	
  Greenberg
  Traurig, LLP IOLTA Account

  
	
  Bank:

  	
   

  	
  Compass
  Bank

  
	
  Bank
  Address:

  	
   

  	
  Medical
  City

  
	
   

  	
   

  	
  7777
  Forest Lane, Suite C130 

  
	
   

  	
   

  	
  Dallas,
  TX. 75230

  
	
  Account
  Number:

  	
   

  	
  25405994

  
	
  ABA
  or Routing No.:

  	
   

  	
  113010547

  
	
  Swift:

  	
   

  	
   

  



 


8.2.2                        Subject to the requirements
of Section 8.1, Greenberg Traurig, LLP will transfer the settlement
payment to IS&S by wire transfer to:


 


	
  Beneficiary:

  	
   

  	
  Innovative
  Solutions & Support, Inc.

  
	
  Bank:

  	
   

  	
  PNC
  Bank - Treasury Management

  
	
  Account
  Number:

  	
   

  	
  1006795363

  
	
  Bank
  Address:

  	
   

  	
  Two
  PNC Plaza

  
	
   

  	
   

  	
  Pittsburgh,
  PA 15265

  
	
   

  	
   

  	
  John
  DiNapoli

  
	
   

  	
   

  	
  Telephone:
  610-725-5760

  
	
   

  	
   

  	
  Fax:
  610-725-5799

  
	
   

  	
   

  	
   

  
	
  ABA
  or Routing No.:

  	
   

  	
  ACH
  Routing Number: 043000096

  
	
  Swift:

  	
   

  	
   

  



 


9.                                       ASSIGNMENT AND
CHANGE OF CONTROL


 


9.1                                 Assignment: General
Rule


 


9.1.1                        Except as is
expressly provided in this Section, Kollsman may not assign, voluntarily, by
operation of law, or otherwise, this Agreement or any rights under this
Agreement, or delegate any duties under this Agreement, without the prior
written consent of IS&S. Any assignment or attempted assignment or other transfer
not in compliance with the


 


5

















 


terms and
conditions of this Agreement will be null and void. As used herein, an
“assignment” includes without limitation a transfer of rights under this
Agreement by reason of merger, acquisition or consolidation in which a party
participates. If a party consents, which consent may be granted or withheld in
such party’s sole discretion, to an assignment of this Agreement, (i) the
successor-in-interest must agree in writing to be bound by the terms and
conditions of this Agreement; and (ii) Kollsman, as the assigning party,
shall retain no rights under this Agreement, but shall remain liable for all of
its obligations hereunder.


 


9.2                                 Exceptions From
General Prohibition Against Assignment


 


9.2.1                        Notwithstanding
Section 9.1, Kollsman may assign this Agreement without the prior consent
of IS&S to an entity which is under the Control of Elbit Systems Ltd., as
part of a transfer of substantially all of the assets of a Kollsman business
unit or shares of Kollsman, provided that Kollsman provides written notice to
IS&S of such assignment, the assignee agrees in writing to be bound by
Kollsman’s obligations under this Agreement and the Consent Order, and Kollsman
remains bound by all of its obligations under this Agreement and the Consent
Order.


 


10.                                 TERMINATION


 


10.1                           Term


 


10.1.1                  The term of this Agreement
shall commence on the Effective Date and remain in effect for a period of ten
(10) years, unless sooner terminated as provided herein. If the Effective
Date does not occur within thirty (30) days after the Execution Date (or any
mutually agreed upon extension), the Agreement will be deemed null and void,
without constituting a waiver of either party’s respective rights, claims or
defenses with respect to the Lawsuit.


 


10.2                           Termination for
Material Breach


 


10.2.1                  Either party shall
have the right to terminate this Agreement, by reason of the occurrence of an
Event of Default. As used herein, an “Event of Default” shall mean (a) a
failure by Kollsman to timely make the payment required by this Agreement;
(b) the disclosure or use by Kollsman of the Trade Secrets or breach by
Kollsman of its agreement as described above; or (c) the breach by a party
of any material provision in this Agreement. Notwithstanding the foregoing, and
without derogating from any other rights and remedies a party may have for the
other party’s breach of this Agreement, under no circumstances will Kollsman be
entitled to a refund of the Settlement Payment.


 


10.3                           Effect of
Expiration and Termination


 


10.3.1                  Upon the expiration
of the term of this Agreement, all rights granted pursuant to this Agreement
shall cease, except that this shall not release Kollsman from its obligation to
maintain the confidentiality of the Trade Secrets or comply with the Consent
Order.


 


6

















 


10.3.2                  Notwithstanding the
above, the rights granted to the non-defaulting party will continue in full
force and effect through the expiration of the term of this Agreement as if
this Agreement remained in full force and effect, provided the Agreement is not
earlier terminated as to the non-defaulting party.


 


10.3.3                   Without limiting
the foregoing, the payment described in Section 8.1 is fully earned and
nonrefundable as of the Effective Date.


 


11.                                 REPRESENTATIONS,
WARRANTIES & DISCLAIMERS


 


11.1                           Representations and
Warranties


 


11.1.1                  IS&S and
Kollsman each represent and warrant that each has the power and authority to
enter into this Agreement, to perform all of its duties and obligations under
this Agreement; and 


 


11.1.2                  IS&S and
Kollsman each represent and warrant that the execution and delivery of this
Agreement does not violate, conflict with, or constitute a default under such
party’s charter or similar organization document, its bylaws or the terms or
provisions of any material agreement or other instrument to which it is a party
or by which it is bound as it relates to any intellectual property rights or to
any order; award, judgment or decree to which it is a party or by which it is
bound.


 


11.1.3                  Kollsman represents
that Kollsman Part No. 20148, is a 2.5-inch square circuit card, to
be provided to the United States Air Force through Raytheon Company in connection
with the Miniature Airborne Light Decoy (“MALD”) for the United States Air
Force program. The product has an air data module, which provides airspeed and
altitude information to a small Raytheon navigation module inside the MALD.
Kollsman represents that this product is based on air data products developed
by CIC in the mid-1990s for military applications (Unmanned Air Vehicles and
Tactical Fighter Aircraft), and that the air data module uses a Raytheon
specified RS 422 communication. Kollsman further represents that the air data
module has no altitude rate change algorithm and does not include and is not
based on any of the Trade Secrets.


 


11.2                           Disclaimers


 


11.2.1                  Nothing contained
in this Agreement shall be construed as:


 


a
warranty or representation by any party as to the validity, enforceability or
scope of any patents;


 


an
agreement by any party to bring or prosecute actions or suits against any third
party for infringement, or conferring any right to any other party to bring or prosecute
actions or suits against any third party for infringement;


 


7

















 


conferring upon any party or
any related entity any right to include in advertising, packaging or other
commercial activities related to any product, any reference to another party
(or its subsidiaries or affiliates), its trade names, trademarks or service
marks in a manner which would be likely to cause confusion or to indicate that
such product is in any way certified by any other party or its subsidiaries or
affiliates; or


 


an obligation to furnish any
technical information, copyrights, mask works or know-how, or any tangible
embodiments thereof.


 


12.                                 CONFIDENTIALITY, NONDISPARAGEMENT AND
EXPLORATION OF FUTURE BUSINESS COOPERATION


 


12.1                           General


 


12.1.1                  No party shall disclose the terms of this
Agreement without the prior written consent of the other party except:


 


in connection with the
Lawsuit or other litigation based upon the allegations which form the basis of
the Lawsuit;


 


to the extent such matters have
been disclosed in press releases already issued by the parties or in the press release
attached as Exhibit B;


 


to any governmental body
having jurisdiction;


 


in response to a valid
subpoena or as otherwise may be required by law, the official rules of a
court or tribunal, or court order, provided that the party receiving such
judicial process shall provide reasonably prompt notice thereof to the other
party, and the parties shall reasonably cooperate to seek a protective order or
otherwise prevent or restrict such disclosure;


 


as otherwise may be required
by law or legal process (including legal requirements and regulations of the
U.S. Securities and Exchange Commission or rules of the NYSE or NASDAQ)
and subject to the requirements herein with respect to public releases;


 


when disclosed by the
disclosing party for bona fide business reasons, which information is
included within the scope of a nondisclosure agreement executed by the
recipient of such information; and


 


to counsel and accountants
for the party.


 


8

















 


12.2                           Seal


 


12.2.1                  Notwithstanding any provision to the contrary
herein, any party is permitted to file this Agreement under seal with and
disclose under seal this Agreement, in whole or in part, and information
relating to this Agreement to a court, tribunal, or government agency of
competent jurisdiction in an action or proceeding brought by or against a party
when reasonably necessary for such action or proceeding, subject to written
notice to the other party and an opportunity to obtain a protective order or
other restriction as described above.


 


12.3                           Press Release


 


12.3.1                  Any public release or announcement by a party
or any of its respective affiliates with respect to the settlement of the
Lawsuit will contain the substance of the form of announcement contained in Exhibit B
hereto. Following the Effective Date of this Agreement, IS&S and/or
Kollsman and their respective affiliates will be entitled to issue a public
release containing the substance set forth in Exhibit B. Any change to
that substance will require the prior written consent of the other party, which
consent shall not be unreasonably withheld.


 


12.4                           Non-Disparagement and Non-Disclosure
regarding Dispute and Lawsuit


 


12.4.1                  The parties agree that neither will engage in
any conduct or communication designed to disparage the other with respect to
any allegations made in the Lawsuit,
the outcome of the Lawsuit, the findings of the Court, or the contents or
impact of this Agreement.


 


12.4.2                  The parties further agree that neither will
furnish, reveal, make available, mention, discuss, or disclose to any third
party, in relation to matters relating to the other party, any allegations in the Lawsuit, the
outcome of the Lawsuit, the findings of the jury or the Court, the jury
verdict, the orders and rulings entered by the Court, including but not limited
to any of the contents of the Court’s orders concerning punitive damages, the
award of attorneys’ fees, the award of prejudgment interest, and the granting
and issuance of temporary,
permanent and head start injunctions (“Breaching Disclosure”), except:


 


in connection with the
Lawsuit or other litigation based upon the allegations which form the basis of
the Lawsuit;


 


to the extent such matters
have been disclosed in press releases already issued by the parties or in the
press release attached as Exhibit B;


 


with the written consent of
the other party;


 


to any governmental body
having jurisdiction;


 


in response to a valid
subpoena or as otherwise may be required by law, the official rules of a
court or tribunal, or court order, provided that the party receiving such
judicial process shall provide reasonably prompt notice thereof to the other
party, and the parties shall reasonably cooperate to seek a protective order or
otherwise prevent or restrict such disclosure;


 


9

















 


as otherwise may be required
by law or legal process (including legal requirements and regulations of the
U.S. Securities and Exchange Commission or rules of the NYSE or NASDAQ)
and subject to the requirements herein with respect to public releases;


 


when disclosed by the
disclosing party for bona fide business
reasons, which information is included within the scope of a nondisclosure
agreement executed by the recipient of such information;


 


to counsel and accountants
for the party; and


 


IS&S may provide notice
of the Consent Order under Rule 65 as necessary to enforce the provisions
of the Consent Order.


 


Under no circumstances,
except as otherwise agreed between the parties, will the parties disclose,
disseminate or publicize the contents of the Court’s rulings with respect to
the temporary injunction, the permanent injunction, exemplary damages,
attorney’s fees or prejudgment interest, and the parties will not refer to
these rulings in marketing, promotional or other sales efforts.


 


12.4.3                  The parties agree that the obligations of
confidentiality and non-disclosure regarding the dispute and the Lawsuit are fundamental
to this Agreement, that irreparable injury will result if there is a breach of
said obligations, that in the event of a breach or threatened breach of said
obligations there will be no adequate remedy at law, and that in the event of
an intentional breach of said obligations, the non-breaching party shall be
entitled to seek immediate and other equitable relief and shall be entitled to
recover liquidated damages of $10,000 (Ten Thousand and No/100 Dollars) per
breaching disclosure.


 


12.5                           Future Cooperation.


 


12.5.1                  The parties may explore potential areas for
future business cooperation, but are under no obligation to do so under this
Agreement.


 


13.                                 SIDE LETTER


 


13.1                           Within one business day of the Execution
Date, Kollsman will provide IS&S with a letter signed by an authorized
representative of Elbit Systems of America, LLC, which states as follows:


 


Elbit Systems of America,
LLC (“Elbit”) is aware of the terms of the Settlement Agreement between
Innovative Solutions and Support and Kollsman, Inc, dated August
    , 2008, and the proposed Consent Order and Permanent
Injunction. Elbit, on behalf of itself and its subsidiaries, agrees to abide by
the Settlement Agreement and Consent Order and Permanent Injunction.


 


10














 


14.                                 MISCELLANEOUS


 


14.1                           Entire Agreement


 


14.1.1                  This Agreement
constitutes the entire agreement between the parties relating to the subject
matter hereof, and supersedes all prior proposals, agreements, representations,
and other communications, if any, between the parties with respect to the
subject matter hereof.


 


14.2                           Modification;
Waiver


 


14.2.1                  No modification or
amendment to this Agreement will be effective unless it is in writing and
executed by authorized representatives of the parties, nor will any waiver of
any rights be effective unless assented to in writing by the party to be
charged. The failure or delay of either party in exercising any of its rights
hereunder, including any rights with respect to a breach or default by the
other party, will in no way operate as a waiver of such rights or prevent the
assertion of such rights with respect to any later breach or default by the
other party.


 


14.3                           Exhibits


 


14.3.1                  Any exhibits
referred to herein will be
construed with and as an integral part of this Agreement to the same extent as if
they were set forth verbatim herein.


 


14.4                           Headings


 


14.4.1                  The headings used
in this Agreement are for reference and convenience only and will not be used
in interpreting the provisions of this Agreement.


 


14.5                           Notices


 


14.5.1                  All notices
required or permitted to be given hereunder shall be in writing and shall be
deemed received as follows: (a) if by personal delivery, then upon actual
receipt, or (b) if by prepaid, overnight courier, then one business day
after delivery to such courier, or (c) if by registered or certified
airmail, postage prepaid, then five (5) business days after delivery to
the post office; all addressed as follows or to such other address as a party
will designate by written notice given to another party in accordance with the
terms of this Section:


 


	
  To
  IS&S:

  	
   

  	
  President

  
	
   

  	
   

  	
  Innovative
  Solutions & Support, Inc.

  
	
   

  	
   

  	
  720
  Pennsylvania Drive

  
	
   

  	
   

  	
  Exton,
  Pennsylvania 19341-1149

  
	
   

  	
   

  	
  U.S.A.

  
	
   

  	
   

  	
   

  
	
  To
  Kollsman:

  	
   

  	
  Chief
  Operating Officer

  
	
   

  	
   

  	
  220
  Daniel Webster Highway

  
	
   

  	
   

  	
  Merrimack, New Hampshire
  03054

  
	
   

  	
   

  	
  U.S.A.

  



 


11

















 


14.6                           Governing Law


 


14.6.1                  This Agreement will be governed by and construed in
accordance with the laws of the State of Tennessee without regard to choice of
law provisions or rules. The parties further agree that this Agreement was
mutually drafted by all parties and that any interpretation of this Agreement
or any terms thereof will not be interpreted against one party as the drafting
party


 


14.6.2                  The Court shall retain jurisdiction over disputes arising out
of this Agreement and the Consent Order, and the parties stipulate that the
state and federal courts located in Memphis, Tennessee, have personal
jurisdiction over the parties.


 


14.7                           Counterparts


 


14.7.1                  This Agreement may be executed in counterparts by any of the parties hereto on any
number of counterparts, each of which will be deemed an original, but all such
respective counterparts will together constitute one and the same agreement.
The parties agree that electronically transmitted signature pages will be
treated as if they were originals.


 


14.8                           Additional Provisions


 


14.8.1                  Each party hereby declares and represents
that it is executing this Agreement after consultation with its own independent
legal counsel.


 


14.8.2                  Any rule of construction to the effect
that ambiguities are to be resolved against the drafting party will not be
applied in the construction or interpretation of this Agreement. As used in
this Agreement, the words “include” and “including,” “for example,” “such as,”
and variations thereof, will not be deemed to be terms of limitation, but
rather will be deemed to be followed by the words “without limitation.”


 


14.8.3                  Each party acknowledges to the other party
that it has been represented by independent legal counsel of its own choice
throughout all of the negotiations which preceded the execution of this
Agreement. Each party further acknowledges that it and its counsel have had
adequate opportunity to make whatever investigation or inquiry they may deem
necessary or desirable in connection with the subject matter of this Agreement
prior to the execution hereof and that in entering into this Agreement it is
not relying on any representations of the other party in connection therewith.


 


In Witness Whereof, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives as undersigned:


 


12

















 


	
  Kollsman, Inc.

  	
   

  	
  Innovative
  Solutions & Support, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Yuval
  Ramon

  	
   

  	
  By:

  	
  /s/ Ray
  Wilson

  
	
  Printed
  Name:

  	
  Yuval Ramon

  	
   

  	
  Printed
  Name:

  	
  Ray Wilson

  
	
  Title:

  	
  VP & COO

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
  Date:

  	
  8/25/08

  	
   

  	
  Date:

  	
  8/27/08

  
									



 


13

















 


EXHIBIT A


 


IN THE UNITED STATES DISTRICT COURT




FOR THE WESTERN DISTRICT OF TENNESSEE




WESTERN DIVISION


 


	
  INNOVATIVE
  SOLUTIONS AND

  	
  §

  	
   

  
	
  SUPPORT,
  INC.,

  	
  §

  	
   

  
	
  Plain tiff

  	
  §

  	
  No. 05-2665-JPM/tmp

  
	
  v.

  	
  §

  	
   

  
	
  J2, INC.,
  JOSEPH CAESAR, JAMES

  	
  §

  	
   

  
	
  ZACHARY,
  ZACHARY TECHNOLOGIES,

  	
  §

  	
   

  
	
  INC., and
  KOLLSMAN, INC.,

  	
  §

  	
   

  
	
  Defendants

  	
  §

  	
   

  



 


CONSENT ORDER AND PERMANENT INJUNCTION


 


Innovative Solutions and Support (“IS&S”) and Kollsman, Inc.
(“Kollsman”) have been engaged in litigation relating to IS&S’ claims for
misappropriation of trade secrets and patent infringement before this Court;


 


Whereas IS&S and Kollsman have entered into a settlement agreement,
dated August      , 2008 (the “Settlement Agreement”)
and are desirous of dismissing the litigation on the terms stated herein;


 


NOW THEREFORE, the parties agree as follows:


 


1.                                       The Court’s previously entered Order granting
IS&S’ request for a permanent and head start injunction and associated
redacted version of that Order (Docket Nos. 763 and 775-2) shall be modified as
to Kollsman in accord with the parties’ Settlement Agreement as follows:


 


A.                                   IT IS HEREBY ORDERED and DECREED that
pursuant to Federal Rule of Civil Procedure 65, all Defendants and their
officers, agents, servants, employees, and


 


1

















 


attorneys, and those
persons in active concert or participation with them who receive actual notice
of this Order by personal service or otherwise, are enjoined and restrained
from using or disclosing in any manner the following six trade secrets (“Trade
Secrets”) of IS&S tried to a jury verdict in this matter:


 


(1)                                  IS&S’ checksum
source code;


 


(2)                                  IS&S’ checksum
algorithm;


 


(3)                                  IS&S’ altitude
rate algorithm,


 


REDACTED


 


and
as described herein:


 


REDACTED


 


b.                                      The “new” Kollsman
altitude rate algorithm used in the 24471, 50042, and 49970 air data computers;


 


(4)                                  IS&S’ combined
recipe incorporated in the IS&S ADDU and AIU interface;


 


(5)                                  IS&S’ RS422
logical message protocol; and


 


(6)                                  IS&S’ testing
and calibration procedures relating to pressure transducer stability, i.e., the
pressure transducer stability problem and how to solve the problem,
specifically:


 


a.                                       The IS&S
testing and calibration procedure


 


REDACTED


 


and


 


b.                                      The Kollsman
testing and calibration procedure 


 


REDACTED


 


B.                                     IT IS FURTHER
ORDERED and DECREED that pursuant to Federal


 


2

















 


Rule of
Procedure 65 Defendant Kollsman and its officers, agents, servants, employees,
and attorneys, and those persons in active concert or participation with it who
receive actual notice of this Order by personal service or otherwise, are
enjoined and restrained for two years from the date of this Order from
manufacturing, marketing, developing, selling, qualifying, or certifying by
similarity with any governmental entity any air data products that are based on
or derived from any use of the Trade Secrets in the 24471, 49970, or 50042
ADCs, and/or any derivatives thereof.


 


C.                                     IT IS FURTHER
ORDERED AND DECREED THAT the Head Start Injunction described in the preceding
paragraph will not prohibit Kollsman from supplying Kollsman
Part No. 20148 to the United States Air Force through Raytheon
Company in connection with the Miniature Airborne Light Decoy for the United
States Air Force program, so long as Kollsman Part No. 20148 does not
use and is not based on the Trade Secrets.


 


D.                                    IT IS FURTHER
ORDERED and DECREED that Kollsman is permitted to use the Trade Secrets as
necessary to repair and return to service any previously sold air data computer
model numbers 24471, 50042, or 49970 or parts thereof or attachments thereto.
In connection with such repairs, Kollsman personnel performing such repairs may
be provided the Trade Secrets only on a need-to-know basis and only to the
extent necessary to perform such repairs and will maintain necessary and sufficient
safeguards so that Trade Secrets are not disclosed or used in any other way.


 


E.                                      This Order does not
supplement or modify in any way the permanent and head start injunctions
currently in place against the other Defendants in this lawsuit.


 


2.                                       Pursuant to the
Settlement Agreement, the terms of which are incorporated herein, all claims
and counterclaims brought by IS&S and Kollsman against the other in this
matter are


 


3

















 


hereby dismissed
with prejudice to the re-filing of same.


 


3.                                       As between them,
IS&S and Kollsman shall each bear their own costs of court.


 


4.                                       The dismissal of
IS&S’ claims against Kollsman shall not be construed as releasing any
claim, cause of action, or judgment IS&S may have against any person,
entity or individual other than Kollsman.


 


5.                                       The parties waive
any right of appeal to this Consent Order.


 


6.                                       The Protective
Order entered by the Court in this action shall remain in full force and
effect.


 


7.                                       The Court retains
jurisdiction over disputes arising out of the Settlement Agreement and the
enforcement of this Consent Order and Permanent Injunction.


 


So ORDERED this
       day of August 2008.


 


 


	
   

  	
   

  
	
   

  	
  UNITED
  STATES DISTRICT JUDGE

  



 


4

















 


EXHIBIT B


 


FORM OF PRESS RELEASE


 


On August         ,2008, a
settlement between Innovative Solutions and Support, Inc. (“IS&S”) and
Kollsman, Inc. (“Kollsman”) became effective with respect to all claims filed
by IS&S and Kollsman against each other in the United States District Court for the Western
District of Tennessee and a Consent Order has been entered. This release is
further to previous announcements by the [the applicable party or its
affiliate] regarding this litigation dated                      
and                      .
 Under the settlement agreement, all
claims between IS&S and Kollsman have been dismissed with prejudice, a
final agreed injunction has been entered, and the matter has been fully and
finally mutually settled without any admission of guilt by either party. In
addition, an agreed settlement payment of $17 million dollars has been made by
Kollsman to IS&S. Kollsman and IS&S may explore opportunities for
future business collaboration.


 


[To the extent required by law, each party may add any required
explanation of the impact of the Settlement Agreement on its financial
results.]


 


5