**Exhibit 10.21**

 

**CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE**

 

ThisConfidential 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 tocollectively 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 Omissionsinsurance policy, number 3529-82-42, effective April 1, 2000, through April 1,2001, and a Federal Commercial Umbrella policy, number 7966-15-50, effectiveApril 1, 2000 through April 1, 2001 (the “Policies”); and

 

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

 

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

 

WHEREASFederal defended E&S in the Lockheed Martin Action; and

 

WHEREASE&S settled the Lockheed Martin Action on or about April 26, 2002 andsubsequently made a claim for indemnity to Federal for the value of E&S’counterclaims that were dismissed  insettlement of the Lockheed Martin Action as well as a claim for payment ofcertain 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 & Ellisattorneys’ fees and expenses under the Policies, and disputed coverage as tothe 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 ImpliedCovenant of Good Faith and Fair Dealing, and Declaratory Relief against Federalin San Francisco Superior Court, case no. CGC 03419926, seeking an adjudicationthat Federal was obligated to indemnify E&S with respect to the LockheedMartin Action and pay the Kirkland & Ellis fees and expenses; and

 

**CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE**

*Evans & Sutherland Computer Corporation v. Federal InsuranceCompany, 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&Sreached with its customer, CAE, memorialized in a settlement agreement datedMarch 11, 2000, and whereas E&S also tendered numerous other matters toFederal, including, but not limited to, those arising out of the followingcontracts and/or projects:

 

1.  SeaHarrier

2.  GR-4Tornado

3. Nimrod

4. United Kingdom Attack Helicopter (UKAH)

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

6.  STNAtlas Elektronik GmbH, and

7.  8thArmy

 

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

 

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

 

WHEREAS,E&S and Federal wish fully and finally to resolve, without admission oradjudication of any issue of fact or law, all disputes that now exist or whichin the future may arise with respect to their respective rights and duties, ifany, under the Policies with respect to the Lockheed Martin Action, Kirkland& Ellis fees and expenses and the Tendered Matters, and any other claimsthat 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 intothis Agreement, and for other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, and intending to be legally boundhereby, E&S and Federal agree as follows:

 

1.                                       DEFINITIONS

 

As used inthis Agreement and for the purpose of this Agreement only, the following termshave 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 andall other Persons who qualify as an (as herein defined) “insured” under thePolicies.

 

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

 

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

 

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

 

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

 

Wells FargoBank

180 South Main

Salt LakeCity, UT  84101

ABA:  121000248

Acct.No.:  4761055250

 

3.                                       DISMISSALOF CLAIMS

 

E&S shallexecute all documents necessary to effect the dismissal, with prejudice, of itsAction filed in the San Francisco Superior Court, Case No. CGC 03419926, whichthe Parties shall file promptly after payment of the settlement specified inParagraph 2 above.

 

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4.                                       RELEASES

 

4.1                                 Uponthe condition precedent that Federal makes the payment set forth in Paragraph 2above, the Parties hereby forever release, acquit, and discharge each otherfrom any and all claims, demands, duties, obligations, liabilities, damages,actions, and causes of action of any kind or nature whatsoever, whether incontract, tort, or otherwise including any claims of “bad faith” or breach ofthe 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 MartinAction, including, without limitation, any and all claims between the Partiesconcerning Federal’s alleged but disputed obligation to indemnify E&S forits settlement of the Lockheed Martin Action, to pay the Kirkland & Ellisfees and expenses, and/or to contribute to any settlement, or any make anyother payments in connection with the Tendered Matters

 

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

 

A generalrelease does not extend to claims which the creditor does not know or suspectto exist in his favor at the time of executing the release, which if known byhim must have materially affected his settlement with the debtor.

 

The Partiesacknowledge that they have discussed with their legal counsel the significanceand effect of waiving Civil Code section 1542 and warrant that this waiver isinformed, knowing, and voluntary.  TheParties acknowledge and understand that this waiver is an essential andmaterial term of this Agreement and that, without such waiver, the Partieswould not have entered into this Agreement.

 

5.                                       NOADMISSION OF LIABILITY OR RESPONSIBILITY

 

5.1                                 E&Sand Federal agree that the payment and acceptance of the settlement sumprovided in Paragraph 2 and the additional terms as set forth herein, and theexecution of this Settlement Agreement, are the result of a compromise ofdisputed claims, and shall never for any purpose be considered an admission ofliability or responsibility by E&S or Federal concerning any of the claimsreferred to herein.  This Agreement  is entered into without prejudice orprecedential value and is not intended to be, nor shall it be construed as, aninterpretation of any insurance policy and shall not be used as evidence or inany other manner in any court or dispute resolution proceeding to create, proveor interpret the obligations and rights of any party under or because of thePolicies, other than in a proceeding to enforce the terms of thisAgreement.  Accordingly, neither thisAgreement nor its substance may be used between the Parties with respect to anyother claim or dispute that may exist between the Parties.  Furthermore, E&S and

 

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Federal denyall liability and intend merely to avoid further litigation, and no past orpresent wrongdoing shall be implied by virtue of this Agreement or the paymentof the settlement sum and the fact of this settlement cannot be used as aprecedent in any other matter.

 

5.2                                 ThisAgreement shall not be admissible in any legal proceeding except to enforce itsterms.

 

6.                                       NOOTHER CLAIMS

 

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

 

7.                                       MERGEROF AGREEMENT

 

This Agreement is an integrated agreement and contains the entireagreement regarding the matters herein between the signatories hereto.  No representations, warranties or promiseshave been made or relied on by any signatory hereto other than as set forthherein.  This Agreement supersedes andcontrols any and all prior communications between the Parties or theirrepresentatives relative to the matters contained herein.

 

8.                                       NORIGHTS CONFERRED UPON NONPARTIES

 

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

 

9.                                       CONFIDENTIALITY

 

9.1                                 Theamount of consideration paid by Federal under this Agreement and the conditionsof this Agreement shall remain strictly confidential.  The Parties, their respective counsel andrepresentatives shall not disclose to any person in any context any of theterms or conditions of this  Agreement,except as specifically follows:  In caseof any subpoena or other application for a court order to request thedisclosure of any of the terms or conditions of this Agreement, the Partyshall, 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 amanner so that it either may seek to quash the subpoena or otherwise object tothe disclosure order.  Further, theParties agree not to oppose any motion by one another requesting that any suchdocuments or

 

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information beproduced only under seal of the court and pursuant only to a reasonableprotective order.

 

9.2                                 Nothingin these paragraphs shall preclude E&S or Federal from sharing with theirrespective accountants or their other paid tax preparers the amount of monies receivedpursuant to this Agreement for the sole purpose of complying with duties andobligations owed to the United States Internal Revenue Service and/or any andall state or local tax authorities.

 

9.3                                 Nothingin these paragraphs shall preclude E&S from making any disclosure of thesettlement required by the Securities and Exchange Commission and the laws andregulations pertaining to disclosures required of publicly traded companies.  Notwithstanding any provision to the contraryin this Settlement Agreement, Federal has relied on E&S’ Form 8-K reportdated December 30, 2005 regarding this settlement and the Parties agree that itdoes not violate the confidentiality provisions of Paragraph 9 and its subparts.

 

9.4                                 Nothingin these paragraphs shall preclude Federal from making any disclosure of thesettlement required by auditors, reinsurers or regulators.

 

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

 

10.                                 CORPORATE REPRESENTATIONS OF THE PARTIES

 

The parties each represent and warrant to the extent applicable:

 

a.                                       Thatthey are each corporations duly organized and each validly existing in goodstanding under the laws of one of the states of the United States;

 

b.                                      Thatthey have taken all necessary corporate and legal actions duly to approve themaking and performance of this Agreement and that no further corporate or otherapproval is necessary;

 

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

 

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

 

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11.                                 BINDING NATURE OF TERMS

 

11.1                           Each ofthe 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 anyprovision of this Agreement or any portion of any provision of this Agreementis declared null and void or unenforceable by any court or tribunal havingjurisdiction, then such provision or such portion of such provision shall beconsidered separate and apart from the remainder of this Agreement which shallremain in full force and effect.

 

12.                                 AUTHORIZATION OF SIGNATORIES

 

The signatories to this Agreement represent and warrant that they areduly authorized to execute this Agreement on behalf of the corporation on whosebehalf 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 OFCONTRACT

 

13.1                           Anydispute with respect to the enforcement of this Agreement shall first besubmitted to mediation pursuant to any method mutually agreeable to theParties.  Any Party requesting suchmediation shall provide to the other Party written notice of such request formediation.  The disputing Party shallmake a good faith effort to try to resolve the dispute by way ofmediation.  Any Party has the right toinstitute legal proceedings, such as filing a lawsuit, with respect to any suchdispute, provided that at least sixty (60) calendar days have expired since thedate the written request for mediation was received by the other Party.

 

13.2                           This Agreement shall be deemed to havebeen entered into, and shall be construed and interpreted in accordance withthe laws of the State of California.  Anylegal proceeding shall be filed in any court of competent jurisdiction in theState of California.

 

14.                                 NOTICE

 

Any statements, communications or notices to be provided pursuant tothis Agreement shall be sent in writing to the attention of the personsindicated below, via certified mail, electronic mail or facsimile, until suchtime as notice of any change of person to be notified or change of address isforwarded 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.                                 NOFURTHER PAYMENT

 

Except asotherwise indicated in this agreement, apart from the payment made under thisAgreement, 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 mattersreleased herein.

 

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16.                                 INFORMEDNEGOTIATIONS

 

This Agreementis the product of informed negotiations between the Parties and theirrepresentatives, including counsel.  Itis agreed that all Parties shared equally in drafting the same and that noParty shall be considered the sole drafting party.  It is further agreed that the rule ofinterpreting ambiguities against the drafting party shall not apply to theinterpretation of this Settlement Agreement.

 

17.                                 WAIVER ANDAGREEMENT

 

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

 

18.                                 MISCELLANEOUS

 

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

 

18.2                           ThisAgreement may be executed in counterparts, all of which together shall constitutea single instrument.

 

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

 

**THE UNDERSIGNED HAVE READ THE FOREGOINGSETTLEMENT 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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