EXHIBIT 10.51 AGREEMENT WITH RESPECT TO THE DEFENSE OF SMITH & WESSON: FIREARMS LITIGATIONJoint Defense Agreement |
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EXHIBIT 10.51
[* * *] = CONFIDENTIAL PORTIONS OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
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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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
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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:
[* * *]
[* * *]
[* * *]
[* * *]
[* * *]
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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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Privileged and Confidential
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
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