SETTLEMENT AGREEMENT AND GENERAL RELEASE

 

This settlement agreement (“Agreement”) is entered into as of December 31, 2012
by and between Brio Capital, L.P. (“Brio”) and Brio Capital Master Fund Ltd., on
the one hand, and World Surveillance Group Inc., formerly Sanswire Corp. and
Globetel Communications Corp. (hereafter, “WSGI”) and Glenn D. Estrella
(“Estrella” and, with WSGI, the “WSGI Parties”), on the other hand. Brio, Brio
Capital Master Fund Ltd. and the WSGI Parties are collectively referred to as
the “Parties.”

 

RECITALS

 

WHEREAS, on or about March 28, 2011, Brio filed a complaint (“Complaint”)
against the WSGI Parties in the Supreme Court of the State of New York,
commencing case number 650830/2011 (hereafter, the “Action”). On December 21,
2011, the Court granted Brio’s motion for summary judgment on Brio’s breach of
contract claim (the “MSJ Order”). The Parties proceeded to litigate the Action
until December 21, 2012, when they reached this settlement in principal.

 

WHEREAS, in response to the MSJ Order, WSGI issued to Brio 6,215,543 shares of
WSGI stock at the end of January 2012. Separately, WSGI and Brio entered into a
settlement agreement on February 21, 2012 resolving only the dispute with
respect to attorneys’ fees due to Brio under the MSJ Order. Under that
agreement, WSGI agreed to pay Brio $57,661.25 in twelve monthly installments, of
which WSGI continues to owe $4,805.15 on February 1, 2013, the last payment due
under the February 21, 2012 settlement of such issues. If that payment is not
made, Brio has the right to an order awarding $60,000 in attorneys’ fees, less
payments actually received, among other things. The share issuance and attorney
fee settlement are not affected by this Settlement Agreement and none of the
obligations thereunder are released by this Agreement (the “Unaffected Rights”).

 

1

 

 

WHEREAS, the Action included claims by Brio against the WSGI Parties for
compensatory damages based on the alleged wrongful delay in the issuance of
shares under Brio’s Warrant Agreement and for punitive damages based on an
alleged breach of fiduciary duties, among other claims. The WSGI Parties dispute
such claims and contend that Brio is not entitled to any further relief.

 

WHEREAS, the Parties deny each and every allegation of improper or unlawful
statements or conduct alleged against them by the other Parties in the Action;
and the Parties deny liability arising from or in connection with any of such
allegations or otherwise.

 

WHEREAS, the Parties desire to settle the claims that were and could have been
asserted in the Action and have engaged in arms’ length negotiations, with each
Party having been represented by counsel, in a joint effort to settle the
Action; and

 

WHEREAS, the Parties desire to settle the Action on the terms stated herein,
subject to approval of the Court of this settlement pursuant to Section 3(a)(10)
of the Securities Exchange Act (15 U.S.C. § 77c(a)(10) (1976)) (hereafter,
“Section 3(a)(10)”);

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements, and
other good and valuable consideration provided for herein, the sufficiency of
which is hereby acknowledged, the Parties agree as follows:

 

1.          Exchange of Settlement Documents.

 

a)         On or about December 31, 2012, each Party shall deliver via overnight
courier, fax or email to the other an executed scanned copy of this Agreement,
and on or about December 31, 2012 shall have deposited an original of such
Agreement in the mail to counsel for the other Party.

 

2

 

 

b)         On or about December 31, 2012, the WSGI Parties shall deliver via
overnight courier, fax or email to Corrigan & Morris LLP, an executed scanned
copy of the Stipulated Judgment setting forth an award in favor of Brio and
against the WSGI Parties of $400,000, fully executed and in the form attached
hereto at Exhibit 1 (the “Stipulated Judgment”). On or about December 31, 2012,
WSGI shall have deposited an original of such Stipulated Judgment in the mail to
Corrigan & Morris LLP. Within 10 days after the final share distribution under
paragraph 3 hereof is made, if WSGI has fully complied with all of its
obligations hereunder, Brio will return to the WSGI Parties or destroy all
copies of the Stipulated Judgment.

 

c)         Within fifteen (15) business days of receipt by counsel for the WSGI
Parties of this Settlement Agreement executed by all Parties, the Parties shall
jointly file a Motion to Approve Settlement Agreement under Section 3(a)(10),
and set the hearing thereon at the earliest time practical on standard notice to
obtain the Court’s order on the proposed attached order annexed hereto as
Exhibit 2. All Parties will support the granting of that motion. If the motion
is denied or not timely approved (within 120 days of filing), this Agreement
shall be null and void. Brio shall prepare the joint motion, and WSGI shall
promptly cooperate with all aspects of the filing and hearing to seek approval
of such motion. The Parties shall also ask the Court to suspend all pre-trial
deadlines for the number of days between December 21, 2012 and the date the
Court resolves the Settlement Motion, so that Party’s litigation rights are not
prejudiced in the event the Court denies the Settlement Motion.

 

3

 

 

d)         In the event that the motion set forth in Section 1(c) is granted,
Brio shall execute and deliver within seven (7) days to Ledwith & Atkinson a
Stipulation of Discontinuance which shall be held in escrow by Ledwith &
Atkinson until the final payment of shares as set forth herein is made.

 

2.          Forbearance Period. Brio agrees to hold the Stipulated Judgment and
not to file or otherwise enforce the Stipulated Judgment during the “Forbearance
Period.” The Forbearance Period shall begin concurrently upon execution of this
Settlement Agreement and shall end if and only in the event that WSGI fails to
comply with the share issuance requirements set forth in Section 3, below, and
only after notice and the passage of the 10 day cure period set forth below. If
this agreement becomes null and void as a result of the Court’s refusal to
approve the settlement under Section 3(a)(10), Brio shall destroy or return the
Stipulated Judgment and all copies thereof to WSGI.

 

3.          WSGI Share Issuances to Brio. WSGI shall issue to Brio’s designee,
Brio Capital Master Fund Ltd., free trading unrestricted shares, subject to
Section 4 below, of its common stock in 12 monthly installments to be delivered
to Brio Capital Master Fund Ltd. into Brio Capital Master Fund Ltd.’s brokerage
account pursuant to instructions set forth in Exhibit 3. The 12 installments
shall be made on the first trading day of each month or as soon thereafter as
practical, and in no event later than the first four trading days of such month.
For each installment, WSGI shall promptly instruct its Transfer Agent to issue
the installment shares via DWAC and notify Brio Capital Master Fund Ltd. of the
instruction and amount of shares. Upon notice, Brio or Brio Capital Master Fund
Ltd. or its broker shall promptly submit any instructions necessary to initiate,
accept and receive such DWAC transfers into Brio Capital Master Fund Ltd.’s
brokerage account for each share installment. If the shares are not issued and
delivered during the first four trading days of any month, Brio shall have the
right to give WSGI written notice of the default. If the default is not cured
within 10 calendar days of Brio sending such written notice of default, Brio
shall have the right to have the Court enter the Stipulated Judgment and to
proceed to enforce that judgment, without further delay. The number of shares to
be issued each month will be an amount calculated as follows: (a) $31,250;
divided by (b) the price that is the average of the closing bid price of WSGI’s
common stock for the last three trading days of the month immediately preceding
the month in which the shares are due to be issued. Thus, for example, if the
last three trading days in January 2013 reflect closing bid prices reported on
OTCMarkets.com of 3.5 cents, 4.0 cents and 4.5 cents, the denominator would be
4.0 cents for the computation of how many shares would be issued on February 1,
2013. Thus, 781,250 shares would be due to be issued on February 1, 2013. The
first month that such shares would be required to be issued is the first month
following the date that an order is entered by the Supreme Court of New York
approving this Settlement Agreement pursuant to Section 3(a)(10).

 

4

 

 

4.          Leakout Provision. Upon receiving shares under this Agreement, Brio
and Brio Capital Master Fund, Ltd agree to restrict their aggregate selling of
such shares to 25% of the daily volume trading of WSGI’s common stock in any
particular day of trading as reported by OTCMarkets.com. For example, if 1
million shares are traded on February 2, 2013, Brio, Brio Capital Master Fund,
Ltd or their designee would restrict their aggregate sales of stock issued under
this Agreement to 250,000 shares on February 2, 2013. Such restriction is
renewed each day. Such restriction would not apply to any sales at prices at or
more than 6 cents per share. There shall be no limit on Brio, Brio Capital
Master Fund, Ltd or their designee’s aggregate sales on multiple days, other
than the daily limitation set forth above. Brio or Brio Capital Master Fund,
Ltd. shall provide WSGI with monthly reports setting forth the amount of WSGI
shares sold each day in the aggregate by Brio and Brio Capital Master Fund, Ltd.
Brio and Brio Capital Master Fund Ltd. further agree that any transfers between
affiliated parties of Brio or Brio Capital Master Fund Ltd. (excluding the
initial DWAC transfer from WSGI to Brio Capital Master Fund Ltd.) shall be
included toward the 25% volume limitation set forth above. Brio and Brio Capital
Master Fund, Ltd agree that this agreement shall be binding on all affiliated
parties who receive transferred shares. The Parties understand that the initial
DWAC transfer from WSGI shall be made to Brio Capital Master Fund Ltd., rather
than Brio, and that such transfer shall not be treated as a transfer between
affiliated parties for purposes of the restrictions hereunder. The Parties also
understand that Brio Capital Master Fund Ltd., by signing below, is bound by the
provisions of this Agreement, including this paragraph, and that Brio Capital
Master Fund Ltd. is an express intended beneficiary of this Agreement entitled
to enforce its terms, including the provisions of paragraph 3, above.

 

5

 

 

5.          General Release Between Brio and WSGI Parties. Brio and Brio Capital
Master Fund, Ltd, on the one hand, and the WSGI Parties, and each of them, on
the other hand, effective upon approval of the Settlement Agreement by the Court
and except for the obligations contained in this agreement, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, do hereby absolutely, fully, and forever release, relieve, waive,
relinquish, and discharge the other, and each of them, as well as each of their
respective successors, predecessors, assigns, affiliates, principals (including,
without limitation, Glenn Estrella and Shaye Hirsch), parent companies,
subsidiary companies, officers, directors, joint venturers, franchisors,
shareholders, members, partners, agents, servants, employers, employees, heirs,
distributees, beneficiaries, executors, representatives, administrators,
accountants, attorneys, insurers, guarantors and each of them (the “Releasees”),
from any and all claims, affirmative defenses, liabilities, demands, judgments
and causes of action of any kind or nature, in law or in equity, whether known
or unknown, whether fixed or contingent, whether actual or alleged, which
existed at the time of the signing of this Agreement, whether or not arising
from or related to the facts alleged by Brio and/or the WSGI Parties in the
Action or that could have been alleged by any of such parties in such Action,
and any cross-complaint, counter-complaint, answer or other pleading that was or
could have been filed by any of the Parties or that arose in connection with any
of the matters stated in the Recitals to this Agreement. Notwithstanding the
foregoing, nothing herein is intended to alter, amend, release or otherwise
affect the Unaffected Rights and/or the obligations arising under this
Agreement. Also, notwithstanding the foregoing, if the Court does not timely
(within 120 days of the execution of this Settlement Agreement) approve the
settlement agreement, such releases shall be null and void.

 

6

 

 

6.          Further Actions. Each of the Parties agrees to take such actions
and/or to execute such documents as reasonably may be necessary to effectuate,
achieve, or/and clarify the purposes of this Agreement.

 

7.          No Assignment. Each of the Parties represents and warrants to each
of the other Parties that, except as provided herein, said Party has not
heretofore assigned or transferred, or purported to assign or transfer, to any
person or entity not a party to this agreement any right, claim, demand, damage,
debt, liability, obligation, account, reckoning, cost, expense, lien, action, or
cause of action which the party has ever had against any of the other Parties to
this agreement, or any part or portion thereof. Each of the Parties to this
agreement agrees to indemnify each of the other Parties, and to hold each of
them harmless, of, from, and against any and all rights, claims, demands,
damages, debts, liabilities, obligations, accounts, reckonings, costs, expenses,
liens, actions, or causes of action (including the payment of reasonable
attorneys' fees and costs, whether or not litigation is commenced), based on,
arising out of or in connection with, or otherwise attributable to, any such
transfer or assignment.

 

7

 

 

8.          No Waiver of Breaches. No delay in exercising any right or remedy
hereunder shall constitute a waiver thereof, and no waiver by a Party of a
breach of this agreement shall be a waiver of any preceding or succeeding
breach.

 

9.          Representations and Warranties.

 

a)         The WSGI Parties, Brio and Brio Capital Master Fund, Ltd represent
and warrant to the other Parties that nothing contained in this Agreement
violates the terms of any other agreement or any applicable law. The WSGI
Parties expressly represent and warrant the issuance of the shares under the
terms of this Agreement by WSGI would not constitute or cause a breach of any
WSGI shareholder rights or trigger the requirement that WSGI must issue or sell
additional shares to any other person, including, without limitation, to any of
the WSGI Parties (except as otherwise provided in this Agreement), and
including, without limitation, any anti-dilution provision under any contract or
security to which WSGI is a party or an issuer.

 

b)          Within four business days of the Court approving the settlement,
WSGI shall disclose the material terms of this settlement in a form 8-K filed
with the Securities and Exchange Commission.

 

c)         No representations or warranties have been or are being made by any
of the Parties, including their parents, subsidiaries, affiliates, predecessors,
successors, assigns, officers, directors, shareholders, members, partners,
employees, agents or representatives, in connection with the purchase and sale
of the securities being made pursuant to the Agreement, except as expressly
stated herein.

 

8

 

 

d)         This Agreement and the releases contained herein shall not be deemed
an admission by any of the Parties of any sort. No right shall inure to any
third party from the obligations, representations and agreements made or
reflected herein.

 

e)         Each of the Parties acknowledges that it has read this Agreement, has
been, or has had the opportunity to be, represented by independent counsel of
his or its own choice in connection with the circumstances leading up to the
execution of the Agreement, understands its terms, conditions and consequences,
and is freely and voluntarily entering into this Agreement.

 

f)         Nothing in the Agreement shall release or waive the obligations or
rights set forth in this Agreement.

 

g)         The parties represent to the Court that the terms of this Agreement
are fair to Brio.

 

10.         Terms of Agreement Are Contractual. It is expressly understood and
agreed that the terms of this Agreement (including the recitals in the preamble)
are contractual and not merely recitations and that the agreements herein
contained are to compromise doubtful and disputed Claims, avoid litigation, and
buy peace and that no releases or other consideration given shall be construed
as an admission of liability, all liability being expressly denied by each
released Party hereto.

 

11.         Notice. Any notice required or appropriate under this Agreement
shall be given at the Parties’ addresses given below, as may be amended, and
shall be deemed to have been successfully sent and delivered on the date that
such notice is either (a) actually received by air courier or messenger,
evidenced by the signature of the parties; or (b) sent via fax and email to both
the party to whom notice is intended, and with a copy of such notice to the
parties’ counsel, listed below.

 

9

 

 

If to Brio:

 

shaye@briocapital.com

Shaye Hirsch 

Brio Capital Management LLC 

100 Merrick Rd, Suite 401W 

Rockville Centre, NY 11570 

New York, NY 10016 

Tel: (516) 536-0500 

Fax: (646) 390-2158

 

With a copy to:

 

Brian T. Corrigan, Esq. 

Corrigan & Morris, LLP 

201 Santa Monica Boulevard, Suite 475 

Santa Monica, California 90401-2212 

Email: bcorrigan@cormorllp.com 

Fax: 310-394-2825 

Phone: 310-394-2828

 

If to WSGI Parties:

 

World Surveillance Group Inc. 

Attention: Barbara Johnson 

State Road 405 

Building M6-306A 

Room 1400 

Kennedy Space Center, FL 32815 

bjohnson@wsgi.com 

O: (321) 452-3545; F: (321) 452-8965

 

With a copy to:

 

Thomas D. Atkinson, Esq. 

Ledwith & Atkinson 

14 St. James Place Lynbrook, New York 11563 

O: (516) 593-1771 | F: (516) 593-1816 - fax 

tatkinson@ledwithatkinson.com

 

10

 

 

12.         Binding Agreement. The provisions of this Agreement shall be binding
upon, and shall obligate, extend to, and inure to the benefit of, each of the
legal successors, assigns, transferees, grantees, and heirs of each of the
Parties, and all persons who may assume any or all of the above-described
capacities subsequent to the execution of this Agreement.

 

13.         Entire Agreement. This Agreement contains the final, complete,
exclusive, and entire agreement and understanding concerning the matters
referenced in the Recitals between the Parties (except as noted hereafter in
this paragraph), and supersedes and/or replaces any and all prior negotiations,
proposed agreements, and agreements, whether written or oral on such subject
matter. Each of the Parties acknowledges that no other Party, nor any agent or
attorney of any other Party, has made any promise, representation, or warranty
whatsoever, express or implied, which is not contained herein concerning such
subject matter, to induce the Party to execute this Agreement, and acknowledges
that the party has not executed this Agreement in reliance upon any such
promise, representation, or warranty not contained herein.

 

14.         Modification. This Agreement may not be modified except by a writing
signed by all Parties affected by such purported modification.

 

15.         Severability. In the event that any portion of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, the validity, legality, and enforceability of the
remaining portions of this Agreement and the application thereof shall not in
any way be affected thereby.

 

16.         Interpretation.

 

a.           Whenever in this Agreement the context may so require, the neuter
gender shall be deemed to refer to and include the masculine and the feminine,
the singular number shall be deemed to refer to and include the plural, and vice
versa.

 

11

 

 

b.           This Agreement is the result of negotiations, and no Party shall be
deemed to have drafted this Agreement for purposes of construing any portion of
the Agreement for or against any Party.

 

c.           The descriptive headings in this Agreement are included for
convenience of reference and are not intended to affect the meaning or
construction of any of the provisions herein.

 

d.           Any exhibit attached hereto shall be deemed to have been
incorporated herein by this reference as if set forth herein at length.

 

17.         Attorneys’ Fees and Costs. The Parties agree that except as
otherwise included in the consideration exchanged in this Agreement and the
Unaffected Rights, the Parties agree to bear their own costs and attorneys fees
incurred to date, if any. In the event that one of the Parties is required to
incur attorneys’ fees and/or costs to enforce or interpret any provision of this
Agreement in an action against another Party, or is required to defend any
action brought by any other Party, based on, arising from or related to this
Agreement or to a matter released under this Agreement, the unsuccessful Party
agrees to pay to the prevailing Party its reasonable attorneys’ fees and costs.

 

18.         Governing Law and Jurisdiction. This Agreement shall in all respects
be interpreted, enforced, and governed by and under the laws of the State of New
York without giving effect to its conflicts of law provisions. The Parties each
expressly agree and consent to the appropriateness of the venue and jurisdiction
of the State of New York in the City of New York and all state and federal
courts having geographical jurisdiction for such County as the exclusive forum
for the purposes of any action to enforce or interpret this Agreement.

 

12

 

 

19.         Capacity to Execute. Each of the Parties, and each person signing
this Agreement, represents and warrants that it and its representative(s)
executing this Agreement on its behalf each has the authority and capacity to
execute this Agreement, to make its warranties and representations, to perform
its covenants, to give its releases, and to fulfill its conditions.

 

20.         Counterparts. Except as otherwise provided herein, the Parties may
execute this Agreement, and any modification(s) hereof, in two or more
counterparts which shall, in the aggregate, be signed by all of the Parties.
Each counterpart shall be deemed an original instrument as against any Party who
has signed it. A faxed or scanned copy of the signature of any of the Parties
shall have the same force and effect as an original signature of such Party.

 

21.         Time of the Essence. To the extent that performance is to be
governed by time, time shall be deemed to be of the essence hereof.

 

WHEREFORE, the Parties have executed this agreement on the day and year set out
next to each of their signatures.

 

Dated:  January __, 2013   BRIO CAPITAL, L.P.               By:           Print
Name:          Title:             Dated:  January __, 2013   BRIO CAPITAL MASTER
FUND, LTD               By:           Print Name:          Title:            
Dated: January __, 2013   WORLD SURVEILLANCE GROUP INC.               By:      
    Print Name:          Title:             Dated: January __, 2013   GLENN D.
ESTRELLA                

 

13