EXHIBIT 10.51 AGREEMENT WITH RESPECT TO THE DEFENSE OF SMITH & WESSON: FIREARMS LITIGATION

 

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                                                                   EXHIBIT 10.51

 

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                                                     Privileged and Confidential

 

                          AGREEMENT WITH RESPECT TO THE

                           DEFENSE OF SMITH & WESSON:

                               FIREARMS LITIGATION

 

     This Agreement is entered into this 11th day of November, 2004 (the

"Effective Date") between and among : (i) Smith & Wesson Corp., on its own

behalf, as well as on behalf of each of its post June 9, 1987 directors,

officers, employees, agents, subsidiaries, divisions, affiliates,

predecessors-in-interest, successors-in-interest, and all persons acting by,

through or under any of them (hereinafter collectively referred to as "Smith &

Wesson"); and (ii) [* * *], on its own behalf and on behalf of its past, present

and future directors, officers, employees, agents, subsidiaries, divisions,

affiliates, predecessors-in-interest, successors-in-interest, and all persons

acting by, through or under any of them (hereinafter collectively referred to as

"[* * *]"). The parties hereto collectively shall be referred to as the

"Parties."

 

     WHEREAS, [* * *] issued a series of commercial general liability and

commercial umbrella liability policies to Smith & Wesson and/or to Tomkins PLC,

under which Smith & Wesson is a named insured (the "[* * *] Policies"). Among

those policies is policy number [* * *], with a policy period of June 1, [* * *]

- June 1, [* * *] (the "[* * *] Umbrella Policy").

 

     WHEREAS, Smith & Wesson has incurred and may incur in the future certain

liabilities, defense costs and damages arising out of the Firearms Litigation as

more fully defined in Article I, Paragraph B;

 

     WHEREAS, there is a dispute between the Parties over coverage under the

[* * *] Policies for all or some of the claims involved in the Firearms

Litigation;

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                                                     Privileged and Confidential

 

     WHEREAS, by this Agreement, Smith & Wesson and [* * *] intend to compromise

and settle certain disputes as to defense of the Firearms Litigation as

described herein strictly as a business accommodation and unrelated to the

merits of the respective claims of the parties hereto, without waiver or

prejudice to their respective positions on claims handling, policy wording or

coverage as contained in the [* * *] Policies or in other matters;

 

     NOW, THEREFORE, in consideration of the foregoing and of the mutual

agreements and undertaking set forth herein, and intending to be legally bound,

Smith & Wesson and [* * *] agree as follows:

 

                                    ARTICLE I

                                   DEFINITIONS

 

     As used throughout this Agreement, the following terms shall be given the

following meanings:

 

     A. Defense Costs  shall mean and include the fees, expenses or costs

incurred or to be incurred by or on behalf of Smith & Wesson in the defense of

the Firearms Litigation, including all fees, expenses or costs that are directly

allocated or attributable to the defense of the Firearms Litigation in general.

Defense Costs shall include, but shall not be limited to, joint defense costs,

investigative expenses, attorney fees, expert fees, consultant fees, witness

fees, jury consultant fees, focus group and jury research charges, exhibit

preparation expenses, courtroom video presentation and equipment, demonstrative

evidence expenses, postage, photocopying charges, facsimile charges, costs

incurred to preserve documents or evidence, computer research costs,

computerized document storage and retention charges, court charges, fees for

mediators, arbitrators, or special masters, all premiums on appeal bonds, court

reporting charges and all other expenses typically incurred in connection with

the

 

 

                                       -2-

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defense of a lawsuit. Defense Costs shall also include all fees and expenses

incurred and to be incurred by or on behalf of Smith & Wesson to pay [* * *]

Defense Counsel, as defined in Article V, Paragraph A.

 

     B. Firearms Litigation  shall mean those litigations listed on Exhibit A

hereto.

 

                                   ARTICLE II

                               SCOPE OF AGREEMENT

 

     Smith & Wesson and [* * *] acknowledge and agree that the purpose of this

Agreement is to resolve between and among themselves disputes as to the [* * *]

Policies with respect to the defense of Smith & Wesson in the Firearms

Litigation. This Agreement is intended to dispose of only those issues of

coverage as identified herein.

 

                                   ARTICLE III

                                     DEFENSE

 

     A. Past Defense Costs.  [* * *] will pay Smith & Wesson the amount of Two

Million Five Hundred Thousand Dollars ($2,500,000.00) (the "Settlement Amount")

in settlement of any obligation to pay Defense Costs previously incurred by

Smith & Wesson and reflected in invoices received by Smith & Wesson through

April 30, 2004 in connection with the Firearms Litigation (the "Past Defense

Costs").

 

     B. Payment of Past Defense Costs.  The Settlement Amount shall be paid by

[* * *] on or before December 31, 2004. The Settlement Amount shall be

transferred electronically to the following account:

 

          [* * *]

          [* * *]

          [* * *]

          [* * *]

          [* * *]

 

 

                                       -3-

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     C. Future Defense Costs.  Smith & Wesson shall forward to [* * *] all

invoices received by Smith & Wesson on or after April 30, 2004 for Defense Costs

with respect to services rendered or performed with respect to only those

litigations listed on Exhibit B herein ("Future Defense Costs"). [* * *] shall

pay Fifty Percent (50%) (the "[* * *] Share") of these Future Defense Costs

represented by such invoices in accordance with the payment procedure set forth

below at Article III, Paragraph D.

 

     D. Procedure for Payment of Future Defense Costs.  Future Defense Costs

will be paid promptly by [* * *] directly to Smith & Wesson after receipt of

invoices for Defense Costs, unless written objection to such Defense Costs

("Objections to Defense Costs") is made by [* * *] within such time. If

Objection to Defense Costs is made in good faith by [* * *], [* * *] shall

withhold from payment only that portion of the Defense Costs to which a good

faith objection is made.

 

     E. Arbitration.  If the parties disagree on an Objection to Defense Costs

made by [* * *], the party wishing to adjust, settle or compromise such

Objection to Defense Costs shall, by legal counsel, notify legal counsel for the

other party, through a confidential written description of the dispute

concerning the Objection to Defense Costs that fairly describes the Defense

Costs at issue. Legal counsel for the party receiving the Objection to Defense

Costs shall send legal counsel for the other party a confidential written

communication stating in full its position(s) regarding the Objection to Defense

Costs. If an adjustment, settlement or compromise is reached by the Parties,

then the Objection to Defense Costs shall be irrevocably resolved. If a full

adjustment, settlement or compromise is not reached, then either party shall

either:

 

 

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          (a) refrain from adjusting, settling or compromising the Objection to

Defense Costs;

 

          (b) adjust, settle or compromise the Objection to Defense Costs only

to the extent agreed to by the other party; or

 

          (c) submit the dispute to binding arbitration, such arbitration to be

conducted pursuant to the protocol set forth in Exhibit C herein.

 

     F. Reservation of Rights.  All payments of Future Defense Costs will be

without prejudice to [* * *] and pursuant to a full and complete reservation of

rights, including the right to recover Defense Costs paid with respect to

uncovered claims, provided:

 

          (a) [* * *]'s right to recover Future Defense Costs applies only to

defense costs incurred by Smith & Wesson after the Effective Date of this

Agreement;

 

          (b) The amount of Future Defense Costs potentially recoverable by

[* * *] under Article III, Paragraph F shall not exceed the dollar amount

reflected on invoices for Future Defense Costs received by [* * *] on a

particular litigation/claim during the period one hundred and twenty (120) days

prior to the time [* * *] notified Smith & Wesson that [* * *] had determined a

particular litigation/claim to be an uncovered claim; and

 

          (c) If the parties disagree as to [* * *]'s determination that a

litigation/claim has become an uncovered claim, or if there is any dispute

regarding Article III, Paragraph F, either party may submit the dispute to

binding arbitration, such arbitration to be conducted pursuant to the protocol

set forth in Exhibit C herein.

 

 

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     G. Exhaustion of Limits.  [* * *] will not be obligated to defend any suit

or claim after the applicable Limits of Insurance in the [* * *] Umbrella Policy

have been exhausted by payment of judgments or settlements.

 

                                   ARTICLE IV

                        APPLICATION OF POLICY PROVISIONS

 

     A. Aggregate Limits Exhaustion.  Smith & Wesson and [* * *] agree, for

purposes of this defense agreement only, that the Firearms Litigation shall be

treated as product liability claims. In addition, Smith & Wesson and [* * *]

agree that the limits of the policies underlying the [* * *] Umbrella Policy are

deemed properly exhausted with respect to the Firearms Litigation and all other

product liability claims.

 

     B. Nonwaiver.  Smith & Wesson and [* * *] agree that except as otherwise

provided herein, this Agreement does not constitute a waiver of any of the terms

and conditions of the [* * *] Policies, and all rights and defenses under the [*

* *] Policies are hereby reserved, nor does anything in this Agreement provide a

basis for asserting an estoppel against any party's assertion of any policy

term, condition, defense or exclusion.

 

                                    ARTICLE V

                               COUNSEL AND CONTROL

                             OF FIREARMS LITIGATIONS

 

     A. [* * *] Defense Counsel.  There shall be one law firm chosen as [* * *]

Defense Counsel which shall be responsible for representing Smith & Wesson and

advising Smith & Wesson in litigation, coordination of discovery and pleadings,

trial preparation, trial (if advisable), settlement negotiation and all other

activities necessary to the effective and consistent defense of Smith & Wesson

in the Firearms Litigation. [* * *] Defense Counsel

 

 

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shall be the law firm Shook, Hardy & Bacon. Any change in [* * *] Defense

Counsel shall be the decision of Smith & Wesson.

 

     B. Defense Counsel.  The selection of counsel in connection with the

defense of any Firearms Litigation shall be the responsibility of Smith &

Wesson. All defense counsel already retained by Smith & Wesson shall continue in

place. Any change in defense counsel shall be the decision of Smith & Wesson.

 

     C. Control of Litigation.  Smith & Wesson and [* * *] agree, to the extent

the best interests of Smith & Wesson are served, to cooperate in the

investigation, defense and control of the Firearms Litigation.

 

                                   ARTICLE VI

                                  MISCELLANEOUS

 

     A. Dismissal.  On or before [* * *], Smith & Wesson shall cause a

Stipulation of Dismissal with Prejudice to be executed and filed with the United

States District Court, [* * *], with respect to the action entitled Smith &

Wesson Corp. v. [* * *], Civil Action Case No.[* * *].

 

     B. Release As To Past Defense Costs.  In consideration of the payment by

[* * *] of the Settlement Amount, Smith & Wesson hereby fully releases, acquits,

and discharges [* * *] from any and all claims, liabilities, actions, direct

actions, causes of action, demands, rights, damages, judgments, debts,

obligations, assessments, costs, deficiencies or other expenses which Smith &

Wesson ever had, now has, or hereafter can, shall or may have under the [* * *]

Umbrella Policy, and/or any other commercial general liability or commercial

umbrella liability policy issued by [* * *], with respect to

 

 

                                       -7-

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