Document:

Exhibit 10.3

 

SETTLEMENT AGREEMENT AND GENERAL RELEASE OF ALL
CLAIMS

 

This Settlement Agreement
and General Release of all Claims (“Agreement”) is entered into on December 30,
2007 (the “Effective Date”) by and between:

 

Etelos Incorporated (“Etelos”)
a Washington corporation with its principal offices at 1900 O’Farrell
Street Suite 320, San Mateo, CA  94403,

 

and the following natural
persons:

 

Selma and Daniel A.
Kolke, husband and wife

21717 S.E. Petrovitsky

Maple Valley, WA 98038

 

Robyn and Daniel J. A.
Kolke, husband and wife

45908 S.E. Edgewick Road

North Bend, WA  98045

 

Kristin and Desmond D.
Kolke, husband and wife

22604 S.E. 392d Street

Enumclaw, WA  98022

 

And

 

Crystal and Raymond D.
Kolke, husband and wife

2212 Camas Circle SE

Renton, WA  98055

 

(sometimes collectively ‘the
Kolke Family”)

 

(separately a “Party” or
collectively, “the Parties”).

 

RECITALS

 

A.                                   Etelos
was founded by members of the Kolke Family in May 1999.

 

B.                                     From
time to time since May 1999, members of the Kolke Family made loans to
Etelos (the “Loans”) in various amounts and forms.

 

C.                                     From
time to time until the present, Etelos has made certain payments on the Loans.

 

D.                                    The
Loans have balances owed to certain members of the Kolke Family.

 

E.                                      The
Parties have resolved the balances owed to each member of the Kolke Family and
wish to provide for the payment of these balances as provided in this
Agreement.

 

AGREEMENT

 

In consideration of the
mutual covenants in this Agreement it is agreed as follows:

 

1.                                       The
balances owed to each member of the Kolke Family on the Loans as of the
Effective Date are set forth in Exhibit A.

 

1

 

2.                                       Etelos
will pay the balances owed by execution and delivery of the Promissory Notes
attached as Exhibits B1, B2, and B3 (the “Notes”).

 

3.                                       The
members of the Kolke Family accept the Notes in full and final payment of the
Loans.

 

4.                                       Any
third party obligations incurred by any member of the Kolke Family in
connection with the Loans, including any transactions between members of the
Kolke Family, are and shall remain the sole responsibility of the affected
members of the Kolke Family.

 

5.                                       The
affected member(s) of the Kolke Family will defend and hold harmless
Etelos from any such third party claims, and will pay the costs, damages, and
reasonable attorneys fees attributable to any such claims that are finally
awarded against Etelos or agreed to by the affected member(s) of the Kolke
Family in settlement, provided that Etelos (a) promptly notifies the
affected member(s) of the Kolke Family of such claims, (b) grants
control of defense and settlement to the affected member(s) of the Kolke
Family, and (c) provides all assistance, information, and authority
required for the defense and settlement of such claims.

 

6.                                       The
members of the Kolke Family, individually and each for their own part,
represent and warrant to Etelos that they are signing this Agreement
voluntarily and with a full understanding of and agreement with all its terms.

 

7.                                       Each
member of the Kolke Family agrees to waive and release all claims relating to
the Loans, known and unknown, suspected or unsuspected, which any of them has
or might otherwise have had against Etelos, on behalf of itself and its
parents, subsidiaries, and related entities, past and present officers,
directors, shareholders, executives, managers, supervisors, insurers,
attorneys, indemnities, agents, successors, and assigns (collectively, “the
Released Parties”), arising prior to the Effective Date.

 

8.                                       Etelos,
on behalf of itself and its parents, subsidiaries, and related entities, past
and present officers, directors, shareholders, executives, managers,
supervisors, insurers, attorneys, indemnities, agents, successors, and assigns
(hereinafter collectively referred to as “the Etelos Parties”), agrees to waive
and release all claims relating to the Loans, known and unknown, suspected or
unsuspected, which they have or might otherwise have had against any member of
the Kolke Family arising prior to the Effective Date, unless it is determined by
a tribunal of competent jurisdiction that such claim is a proximate result of
gross negligence or fraudulent misrepresentation by a member of the Kolke
Family.

 

9.                                       It
is expressly understood and agreed that the releases given in Sections 7 and 8
of this Agreement are applicable only to the Loans and are not intended in any
way to apply to the Notes or to any other interests, including shares, options,
other instruments, or employment, which any member of the Kolke Family has or
may have in or in relation to Etelos.

 

2

 

10.                                 It
is further understood and agreed that as a condition of this Agreement, all
rights under Section 1542 of the Civil Code of the State of California are
expressly waived by the Parties. Such Section reads as follows:

 

“A
general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release,
which if known by him or her must have materially affected his or her settlement
with the debtor.”

 

Thus, for the purpose of
implementing a full and complete mutual release and discharge of the Parties,
the Parties expressly acknowledge that this Agreement is intended to include
and does include in its effect, without limitation, all claims which either
Party does not know or suspect to exist in his or her favor against the other
Party at the time of execution of this Agreement, and that this Agreement
expressly contemplates the extinguishment of all such claims.

 

11.                                 Each
member of the Kolke Family agrees that they  will not:

 

a.                                       Prosecute,
or allow to be prosecuted on their  behalf, in any
administrative agency, whether state or federal, or in any court, whether state
or federal, any claim or demand of any type related to the Loans, it being the
intention of the Parties that with the execution of this Agreement, except as
otherwise provided in the Notes, the Released Parties will be absolutely,
unconditionally and forever discharged of and from all obligations to or on
behalf of the Kolke Family related in any way to Loans; or

 

b.                                      Issue any
communication, written or otherwise, that disparages, criticizes or otherwise
reflects adversely or encourages any adverse action against Etelos or the
Released Parties except if testifying truthfully under oath pursuant to
subpoena or otherwise.

 

12.                                 This Agreement may not be changed orally, and
no modification, amendment or waiver of any provision of this Agreement or any
future representation, promise or condition in connection with its subject
matter, shall be binding upon any Party unless made in writing and signed by
such Party.

 

13.                                 No member of the Kolke Family will have the
right to assign any of their rights or obligations this Agreement, except to
another member of the Kolke Family, without the prior written consent of Etelos.
Except as otherwise provided, any such attempt to assign a right or obligation
under this Agreement without such consent will be null and void. Etelos may
assign or transfer any of its rights or obligations under this Agreement upon
written notice to all members of the Kolke Family.

 

14.                                 This Agreement will be governed by and
construed in accordance with the laws of the State of California without
reference to its conflict of laws principles. Any legal action or proceeding
arising will be brought exclusively in the federal or state courts of San Mateo
County California.

 

15.                                 If for any reason a tribunal of competent
jurisdiction finds any provision of this Agreement invalid or unenforceable,
then that provision of this Agreement shall be enforced to the maximum extent
permissible and the other provisions of this Agreement shall remain in full
force and effect.

 

16.                                 The failure by any Party to enforce any
provision of this Agreement will not constitute a waiver of future enforcement
of that or any other provision.

 

3

 

17.                                 All notices, demands or consents required or
permitted shall be in writing. Notice shall be considered effective on the
earlier of actual receipt or:  (a) the
day following transmission if sent electronically followed by written
confirmation; or (b) one day (two days for international addresses) after
posting when sent via a commercial express courier. Notice shall be sent to the
address for each Party set forth on the first page of this Agreement, or
at such other address as shall be given by either Party to the other in writing.
Notices to Etelos shall be addressed to the attention of “General Counsel” at
the address listed above or as amended.

 

18.                                 This
Agreement has been authorized by all necessary corporate action on the part of
Etelos and, except as otherwise provided in the Notes, contains the entire
agreement between the Parties and supersedes any and all prior and
contemporaneous oral and written agreements with regard to the Loans.

 

19.                                 This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original.

 

20.                                 This
Agreement shall benefit and is binding upon the Parties and their respective
heirs and permitted successors and assigns.

 

- signatures follow -

 

4

 

WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT EFFECTIVE ON THE DATE FIRST SET FORTH ABOVE.

 

	
  SELMA
  and DANIEL A. KOLKE

  	
   

  	
  ETELOS
  INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Daniel A.
  Kolke

  	
   

  	
  By:

  	
    /s/
  Jeffrey L. Garon

  
	
   

  	
   

  	
  Jeffrey L. Garon

  
	
   

  	
   

  	
  President &
  Chief Executive Officer

  
	
  /s/ Selma Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ROBYN
  and DANIEL J. A. KOLKE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Robyn Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Daniel J A.
  Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  KRISTIN
  and DESMOND D. KOLKE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Kristin
  Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Desmond D. Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CRYSTAL
  and RAYMOND D. KOLKE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Crystal
  Kolke

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Raymond D.
  Kolke

  	
   

  	
   

  

 

5

 

EXHIBIT A

 

BALANCES OWED ON THE LOANS

 

	
  Selma and Daniel
  A. Kolke

  	
   

  	
  $

  	
  644,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robyn and Daniel
  J. A. Kolke

  	
   

  	
  $

  	
  120,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kristin and
  Desmond D. Kolke

  	
   

  	
  $

  	
  51,827.42

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Crystal and
  Raymond D. Kolke

  	
   

  	
  $

  	
  0.00

  	
  [Zero]

  

 

6

 

EXHIBIT A1

 

7

 

EXHIBIT A2

 

8

 

EXHIBIT A3

 

9Exhibit
10.4

 

PROMISSORY
NOTE

 

$644,000.00

 

	
  December 30,
  2007

  	
   

  	
  San
  Mateo, California

  

 

This Promissory Note is entered into pursuant to the Settlement
Agreement dated December 30, 2007.

 

1.             Promise to Pay.

 

ETELOS INCORPORATED (“Maker”) promises to pay to the order of SELMA AND
DANIEL A. KOLKE (“Promisees”) at San Mateo, California, or at such other place
as Promisees may designate in writing, in lawful money of the United States of
America, the principal sum of Six Hundred Forty-four Thousand and 00100 Dollars
($644,000.00), with interest thereon until maturity, whether scheduled or
accelerated, at the rate of 7.50%.

 

2.             Payment Obligation

 

Maker shall commence making equal monthly payments of principal and
interest on or before January 1, 2008, in accordance with the attached
Schedule, and the unpaid balance of principal and accrued interest, if any,
shall be due and payable in full on or before June 30, 2017 (the “Maturity
Date”).

 

3.             No Pre-Payment
Penalty

 

There shall be no penalty for any prepayment, in full or in part, at
any time before the Maturity Date.

 

4.               Security

 

There will be no security for this Note for so long as Daniel J. A.
Kolke remains either an employee or member of the Board of Directors of Maker
prior to the Maturity Date.  If, at any
time prior to the Maturity Date, Daniel J. A. Kolke is neither an employee or
member of the Board of Directors of Maker, then Maker will grant to Promisees a
security interest in certain assets of Maker, which security interest shall be
subordinated to any and all bank debt or convertible corporate debt of Maker,
but senior to short-term liabilities of the Maker.

 

5.             Events of Default.  The occurrence of any of the following shall,
at Promisees’ ‘option, (1) make all sums of interest, principal and any other
amounts owing immediately due and payable without notice of default,
presentment, or demand for payment, protest, or notice of nonpayment or
dishonor or any other notices or demands; and (2) give Promisees the right
to exercise any other right or remedy provided by contract or applicable law:

 

(a) 
     Maker shall fail to make a monthly
payment of principal or interest when due under this Note, without providing
notice of non-payment; or to perform any other obligation under this Note or
any contract, instrument, addenda, or document executed in connection with this
Note; or

 

(b) 
    Any representation or warranty made in
the Settlement Agreement or in any financial statement, certificate, or other
document provided by Maker shall be found by a court of competent jurisdiction
to have been false or misleading; or

 

 

(c) 
     Maker shall fail to pay its debts
generally as they become due or shall file any petition or action for relief
under any bankruptcy, insolvency, reorganization, moratorium, creditor
composition law, or any other law for the relief of or relating to debtors; an
involuntary petition shall be filed under any bankruptcy law against Maker, or
a custodian, receiver, trustee, assignee for the benefit of creditors, or other
similar official shall be appointed to take possession, custody, or control of
the properties of Maker; or the dissolution of Maker.

 

Promisees have the right at their sole option to continue to accept
interest and/or principal payments due under the Note after any such default,
and such acceptance shall not constitute a waiver of said default or an
extension of the maturity date unless Promisees agree otherwise in writing.

 

6.     Choice of Law.   This Note shall be construed in accordance
with, and governed in all respects by, the laws of the State of California,
excluding its conflicts of laws principles. 
The Parties agree to submit to the jurisdiction of the Federal and state
courts of California in and for San Mateo County [CA] and agree to be bound by
the decisions of such courts with respect to the breach or interpretation of
this Agreement, or the enforcement of any and all rights, duties, liabilities,
obligations, powers, and other relations between the Parties arising out of
this Agreement.

 

7.     General. This Promissory Note is entered
into pursuant and subject to the terms and conditions of a certain Settlement
Agreement between the Parties and others of even date.  Maker has all necessary right, power and
authority to issue and perform its obligations under this Note.  This Note is a binding obligation of Maker
and shall be binding upon the Parties and their respective heirs and permitted
successors, and assigns.  Notices shall
be given in accordance with the provisions in the Settlement Agreement. The
failure of any Party to enforce any provision of this Note in accordance with
its terms will not constitute a waiver of future enforcement of that or any
other provision of this Note.  To the
fullest extent permitted by applicable law, Maker, for itself and its agents,
legal representatives, successors, and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of nonpayment, notice of maturity,
notice of protest, presentment for the purpose of accelerating maturity,
diligence in collection, and the benefit of any exemption or insolvency laws.

 

	
   

  	
  ETELOS
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jeffrey L. Garon

  
	
   

  	
  Authorized
  Signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]