Document:

Exhibit 10.23

 

CONFIDENTIAL SETTLEMENT
AGREEMENT

AND GENERAL MUTUAL
RELEASE

 

THIS CONFIDENTIAL AGREEMENT AND GENERAL MUTUAL RELEASE [sometimes, ‘this
Agreement’] is entered into between ETELOS, INC., a Delaware corporation
[‘Etelos’] and Jeffrey L. Garon and the Jeffrey and Alesia Garon Family Trust
Dated August 22, 2002, Jeffrey L. Garon and Alesia Garon, Trustees
[collectively, ‘Garon’][As used in this Agreement, Etelos and Garon are each a
‘Party’ or, collectively, the ‘Parties’].

 

The “Effective Date” of this Agreement is eight days after its full
execution.

 

RECITALS

 

A.                                   Etelos and Jeffrey L. Garon entered into an Employment
Agreement dated August 11, 2007, pursuant to which Etelos and Garon
entered into a Restricted Stock Purchase Agreement dated February 27, 2008
[the ‘Employment Agreements’].

 

B.                                     The employment of Jeffrey L. Garon pursuant to the
Employment Agreement ended on September 18, 2008.

 

C.                                     The Parties also have been parties to the matter of Etelos, Inc.
v. Jeffrey Garon before the American Arbitration Association [Case
No. 74 166 00535 09 LMT] in which they have asserted various claims and
counterclaims relating to the Employment Agreements (the ‘Arbitration’).

 

D.                                    The Parties wish to compromise, settle and resolve all
disputes and claims between them arising out of the Employment Agreements and
the Arbitration without any admission of liability or wrongdoing and in order
to avoid the time and expense of continuing to litigate these matters.  THEREFORE, it is agreed as follows:

 

AGREEMENT

 

1.                                       As of the Effective Date of this Agreement, the
Employment Agreements are terminated and shall have no further force and
effect.

 

2.                                       All claims and counterclaims asserted by the Parties
in the matter of Etelos, Inc. v. Jeffrey Garon are dismissed with
prejudice concurrently with the Effective Date of this Agreement and the
Parties will immediately take all steps reasonably necessary to notify the
American Arbitration Association that this matter has been settled and should
be closed and dismissed with prejudice, including all claims, counterclaims
and/or causes of action that

 

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were alleged therein. In accordance with the arbitration clause in the
Employment Agreement dated August 11, 2007, the Parties will share the
American Arbitration Association costs equally between them.

 

3.                                       Garon, separately and collectively, represents and
warrants that [a] it owns 2,356,655 shares of restricted common stock of
Etelos, Inc. [ ‘the Shares’] [b] it has not pledged, sold, delivered,
transferred, assigned, or hypothecated any interest in the Shares, [c] other
than the claims asserted by Etelos, it has good and marketable title to the
Shares and is conveying the Shares to Etelos free and clear of any liens and
encumbrances, [d] the Shares constitute 100% of the Etelos common stock owned
by Garon, except for 11,580 other shares held by Garon in street name, and [e]
except as stated herein, Garon does not own any further interest in Etelos, nor
any right to acquire any further interest in Etelos whether by means of option,
warrant, subscription, or other interest. 
Nothing in the Agreement shall restrict the right of Garon to buy or
sell shares of Etelos in the open market after the Effective Date.

 

4.                                       Garon and Etelos each represent and warrant that he/it
have not filed any claims against the other Party in any court, alternative
dispute resolution provider, state or federal agency, or in any other forum
other than in the matter of Etelos, Inc. v. Jeffrey Garon before
the American Arbitration Association. 
Garon, separately and collectively, further represents and warrants that
apart from the Arbitration no claims against any of Etelos’ present or past
directors, officers, or shareholders, employees, consultants, agents, attorneys
or affiliates, have been filed by Garon or on behalf of Garon before any court,
alternative dispute resolution provider, state or federal agency.

 

5.                                       Etelos will repurchase from Garon 2,356,655 shares of
Etelos common stock for the price of $0.0741 per share or $174,688.99 in the
aggregate [the ‘Stock Repurchase Price’].

 

6.                                       The Stock Repurchase Price will be paid in three equal
amounts of $58,229.66 [each a ‘Payment’] on December 15, 2009,
January 15, 2010, and February 16, 2010 [a ‘Payment Date’]. Each of
the three Payments shall be by cashier’s check made payable to Jeffrey L. Garon
and delivered to the Escrow Agent identified in Paragraph 8 by that Payment’s
corresponding Payment Date. A Payment may be made prior to a Payment Date and
the Escrow Agent shall be instructed to perform its obligations, in accordance
with Paragraph 8 below, immediately upon receipt of any Payment. In the event
that Etelos fails to make a Payment on the Payment Date, Garon may, in
accordance with Paragraph 8, below, issue a written notice of default to

 

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Etelos in accordance with the notice provisions in Paragraph 15, below, and
proceed in accordance with Paragraph 8.

 

7.                                       Within 2 business days of the Effective Date of this Agreement,
[a] Garon shall deliver certificate[s] for 2,356,655 shares to BNY Mellon
Shareholder Services, Stock Transfer Agent for Etelos, and [b] request that the
shares be reissued, without restrictive legend, in three new certificates [two
for 789,412 shares each, and one for 789,411 shares, labeled for purposes of
this Agreement only as Certificates 1, 2 and 3, or a ‘Certificate’], and [c]
direct that the Certificates be delivered to the Escrow Agent identified in
Paragraph 8 below.  Concurrently, Etelos
shall instruct BNY Mellon [d] to remove all restrictive legends from these
shares and [e] to deliver to the Escrow Agent identified in Paragraph 8 below.

 

8.                                       Within five business days of the execution of this
Agreement, the Parties shall mutually agree upon a third party Escrow Agent,
who shall be instructed: [a] to take custody of the three Certificates, [b] to
take custody from Garon of fully executed and medallion guaranteed assignments
separate from certificate for each of the Certificates to transfer all the
shares represented by that Certificate to Etelos, [c] to receive the Payments,
[d] to forward the Payments to Garon immediately upon receipt, and [e] for each
such Payment, to deliver to Etelos a Certificate, together with Garon’s fully
executed and medallion guaranteed assignment separate from certificate for that
Certificate, immediately upon receipt of a Payment. In the event that Etelos
fails to make a Payment on the Payment Dates in Paragraph 6, Garon may issue a
written notice of default to Etelos in accordance with the notice provisions in
Paragraph 15.  Etelos shall have four
days following receipt of the notice of default to deliver the Payment to the
Escrow Agent and cure the default.  If
Etelos fails to cure the default, then Garon may instruct the Escrow Agent to
deliver to him the Certificate for the shares of stock to have been purchased
by that Payment.  The Parties shall
subsequently enter into an Escrow Agent Agreement, which will be attached as
Exhibit A to this Agreement and incorporated herein by reference.  Etelos shall pay costs of the Escrow.  Any breach of the Escrow Agent Agreement by
the Escrow Agent shall not be deemed a breach of this Agreement and shall have
no effect on the enforceability of this Agreement.

 

9.                                       In connection with the wage and expense claims
asserted by Jeffrey L. Garon, Etelos agrees to pay to Jeffrey L. Garon the
amount of $28,600.00, in full settlement of all such claims, which amount shall
be paid within two (2) business days of the Effective Date of this
Agreement.

 

10.                                 In connection with the execution of this Agreement,
Etelos will file a current report on Form 8K with the SEC.  With respect to the disputes

 

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between the Parties and this Confidential Settlement Agreement and Mutual
General Release, the report will disclose the following: “On November XX,
2009, Etelos entered into a settlement agreement with its former CEO Jeffrey L.
Garon.  The settlement agreement resolved
the arbitration proceeding that was filed on June 22, 2009, and provided
for the dismissal and release of all claims between the parties and their
affiliates.  In connection with the
settlement agreement, Etelos agreed to repurchase 2,356,655 shares of common
stock previously issued to Garon at the original purchase price of
approximately $175,000.  Etelos has
agreed to pay for the shares of common stock in three payments of approximately
$58,000 each, on December 15, 2009, January 15, 2010, and
February 16, 2010. Each payment obligation is secured by an interest in
the shares being purchased and the shares can be released to Mr. Garon if
a payment is not made when due in accordance with the terms of the settlement
agreement.”

 

11.                                 Mutual General Releases

 

(a)                                  In consideration of the payments to be made and the
benefits to be received by Garon pursuant to the Agreement, which Garon,
individually and collectively, acknowledges are in addition to payments and
benefits which Garon would be entitled to receive absent the Agreement, Garon, for
himself/itself and his/its dependents, successors, successors in interests,
assigns, heirs, trustees, executors and administrators (and his and their legal
representatives of every kind), hereby forever releases, dismisses, remises and
discharges Etelos, its predecessors, parents, subsidiaries, divisions, related
or affiliated companies and other affiliates, officers, directors,
stockholders, members, employees, consultants, heirs, successors, assigns,
representatives, agents and counsel, including, without limiting the foregoing,
in their individual and corporate capacities, Desmond D. Kolke, Daniel J. A.
Kolke, Ronald A. Rudy, Andrew I. Liu, Robert Thordarson, and Kennedy A. Brooks
(collectively, the “Releasees”) from any and all arbitrations, claims, fees
(including claims for attorney’s fees), demands, causes of action, damages,
suits, proceedings, actions and/or liabilities of any kind and every
description, whether known or unknown (based upon any legal or equitable
theory, whether contractual, common-law, statutory, decisional, federal, state,
local or otherwise) (together “claims”), which Garon now has or may have had
for, upon, or by reason of any cause whatsoever against the Releasees, by
reason of any actual or alleged act, omission, transaction, practice, conduct,
occurrence, or other matter from the beginning of the world up to and including
the Effective Date of this Agreement, including but not limited to:

 

i.                                          any and all claims in any way arising out of or
relating to Jeffrey L. Garon’s employment by or service with Etelos and the
termination of such employment by or service with Etelos;

 

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ii.                                       any and all claims of discrimination, including but
not limited to claims of discrimination on the basis of sex, race, age,
national origin, marital status, religion or handicap, including, specifically,
but without limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act
of 1964, as amended, the Americans with Disabilities Act, Section 806 of
the Sarbanes Oxley Act of 2002; the Employee Retirement Income Security Act of
1974, as amended (“ERISA”) (excluding claims for accrued, vested benefits under
any employee benefit plan of Etelos in accordance with the terms of such plan
and applicable law); the California Fair Employment and Housing Act (“FEHA”),
California Equal Pay Law, California Family Rights Act of 1991 (as amended),
California Paid Family Leave Law, the California Whistleblower Protection Law;
California Confidentiality of Medical Information law; California Family and
Medical Leave law; California Electronic Monitoring of Employees law; any and
all California Wages, Hours, and Working Conditions Laws; and

 

iii.                                    any and all claims of wrongful or unjust termination
or breach of any contract or promise, express or implied.  The release set forth herein is not intended
and does not release Etelos from any of its obligations under this Agreement.

 

(b)                                 In consideration of Garon executing this Agreement,
Etelos and any of its past or present officers or directors (whether acting as
agents for such entities or in their individual capacities) (hereinafter
collectively referred to as the “Company Releasors”), forever release and
discharge Garon, from any and all claims, demands, causes of action, fees,
damages, suits, proceedings, actions and/or liabilities of any kind and every
description, whether known or unknown (based upon any legal or equitable
theory, whether contractual, common-law, statutory, decisional, federal, state,
local or otherwise) (together, “Claims”), which the  Company Releasors ever had, now have or may
have against Garon by reason of any actual or alleged act, omission,
transaction, practice, conduct, occurrence, or other matter from the beginning
of the world up to and including the Effective Date of this Agreement.  The release set forth herein is not intended
and does not release Garon from any of his obligations under this Agreement.

 

(c)                                  As a further consideration and inducement for this
Agreement, to the extent permitted by law, Garon and Etelos each hereby waives
and releases any and all rights under Section 1542 of the California Civil
Code or any analogous state, local, or federal law, statute, rule, order or
regulation that Garon and Etelos have or may have with respect to each
other.  California Civil Code
Section 1542 reads as follows:

 

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“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.”

 

Garon and Etelos each hereby expressly agrees that this release shall
extend and apply to all unknown, unsuspected and unanticipated injuries and
damages, as well as any that are now disclosed, arising prior to the parties’
execution of this Agreement.  This
release does not extend to those rights, which as a matter of law cannot be
waived, including but not limited to unwaivable rights Garon may have under the
California Labor Code.  Nothing in this
Agreement shall limit Garon’s right to file a charge or complaint with any
state or federal agency or to participate or cooperate in such a manner.

 

(d)                                 Notwithstanding the foregoing, nothing in this
Agreement shall be construed to prevent Garon from filing a charge with or
participating in an investigation conducted by any governmental agency,
including, without limitation, the United States Equal Employment Opportunity
Commission (“EEOC”) or applicable state or city fair employment practices
agency, to the extent required or permitted by law.  Nevertheless, Garon understands and agrees
that he is waiving any relief available (including, for example, monetary
damages or reinstatement), under any of the claims and/or causes of action
waived in this Agreement, including but not limited to financial benefit or
monetary recovery from any lawsuit filed or settlement reached by the EEOC or
anyone else with respect to any claims released and waived in this Agreement.

 

(e)                                  Garon and Etelos each understands and acknowledges
that each Party does not admit any violation of law, liability or invasion of
any of his rights and that any such violation, liability or invasion is
expressly denied. The consideration provided for this Agreement is made for the
purpose of settling and extinguishing all claims and rights (and every other
similar or dissimilar matter) that Garon and Etelos ever had or now may have
against each other to the extent provided in this Agreement.  Each Party further agrees and acknowledges
that no representations, promises or inducements have been made by the other
Party other than as appear in this Agreement.

 

(f)                                    Jeffrey L. Garon further agrees and acknowledges that:

 

i.                                          The release provided for herein releases claims to and
including the date of this Agreement;

 

ii.                                       Garon has been advised by Etelos to consult with legal
counsel prior to executing this Agreement, has had an opportunity to consult
with and to be advised by legal counsel of his/its choice, fully understands
the terms of this

 

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Agreement, and enters into this Agreement freely, voluntarily and intending
to be bound;

 

iii.                                    Jeffrey L. Garon acknowledges that he has up to 21
days to review and consider the terms of this Agreement prior to its execution,
to consult with an attorney of his choosing, to decide whether or not to sign
the Agreement, and that he may use as much of the 21-day period as he desires;
and

 

iv.                                   Jeffrey L. Garon may revoke this Agreement within
seven (7) calendar days after signing this Agreement, provided that any
such revocation must be written and dated within the seven-day period, delivered
in writing to Daniel J. A. Kolke, Chairman of the Board of Etelos, and such
written notice must be actually received by Daniel J. A. Kolke, Chairman of the
Board of Etelos no later than the close of business on the 7th day after
Jeffrey L. Garon executes this Agreement. If Jeffrey L. Garon does exercise his
right to revoke this Agreement, all of the terms and conditions of the
Agreement shall be of no force and effect, and Etelos shall not have any
obligation to make payments or provide benefits to Garon as set forth in this
Agreement.

 

(g)                                 Garon, separately and collectively, and Etelos, each
covenants and agrees that he/it will never file a lawsuit, arbitration demand,
or other complaint or demand, asserting any claim, that is released in this
Agreement, against the other Party or its directors or officers.

 

12.                                 Mutual Non-Disparagement and Confidentiality
Agreements and Agreement to Maintain Confidentiality

 

(a)                                  Garon, separately and collectively, agrees that he/it
will not publicly disparage (or induce or encourage others to publicly
disparage) Etelos or its management or members of its Board of Directors.  Etelos agrees that it shall direct the
members of its management and of its Board of Directors not to publicly
disparage (or induce or encourage others to publicly disparage) Garon.

 

(b)                                 In consideration of this Agreement and the
undertakings therein, the Parties, and their respective counsel, agree that
they will not knowingly or voluntarily publicize, disclose, or characterize or
cause to be publicized, disclosed, or characterized to any third person or
entity any of the terms or conditions of this Agreement, the substance of
negotiations leading up to or respecting this Agreement or any other
information which would assist a third person or entity in learning of such
terms and conditions or the substance of any such negotiations, except to the
extent required by law.  Any oral or
written comments by the Parties and their respective counsel about this Agreement
shall be limited to statements that Etelos filed the arbitration demand against
Jeffrey L. Garon, that Jeffrey L. Garon and the Jeffrey and Alesia Garon Family
Trust Dated August 22, 2002 filed

 

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counterclaims in arbitration against Etelos and certain of its directors
and employees; and that all such claims and counterclaims were resolved
pursuant to a confidential settlement agreement.

 

(c)                                  Garon further agrees that he will maintain the
confidentiality of all Etelos trade secrets and proprietary information, unless
and until such information is made public through no actions of Garon.  By signing below, Garon acknowledges that as
of the Effective Date of this Agreement, he/it has returned to Etelos any and
all Company property with the exception of the backup of electronic information
that Garon retained from his Etelos employment, which was produced to Etelos in
this Arbitration. By signing below, Garon further acknowledge and certify, for
themselves and their attorneys, that, as of ten days after the Effective Date,
he/it/they have returned to Etelos or have destroyed all documents and copies
of documents (i) produced by Etelos in the Arbitration, or
(ii) containing information originating with Etelos and obtained through
Jeffrey Garon’s employment with Etelos as director, officer, employee,
consultant and/or investment banker (including but not limited to the backup of
electronic information that Garon retained from his Etelos employment).

 

13.                                 Nothing in this Agreement purports to preclude Garon
from responding to or providing any information requested by legal process,
such as by subpoena.  Garon agrees to
reasonably notify Etelos of such requests, and that, in the event he is
subpoenaed by any person or entity (including, but not limited to, any
government or quasi-government agency) to give testimony (by declaration,
deposition, testifying in a court proceeding, or otherwise) which in any way
relates to Garon’s employment or service with Etelos, he will give reasonably
prompt notice of such request to the current Etelos Board Chairman or his
successor, and will make no disclosure until Etelos has had a reasonable
opportunity to contest the right of the requesting person or entity to such
disclosure.

 

14.                                 Each of the Parties represents and warrants that he,
she, or it has not sold, assigned, or transferred to any person or entity any
claim, cause of action, or liability which is being released hereby.  In addition, each person executing this
Agreement on behalf of an entity corporation or trust represents and warrants
that he or she has the power and authority to execute this Agreement and that
the entry into this Agreement is a duly authorized act of such entity.

 

15.                                 Miscellaneous Provisions.

 

(a)                                  Waiver.  No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Party to be charged.  No waiver by any Party of any breach of, or
of compliance with, any condition or provision of this Agreement by the

 

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other Party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.

 

(b)                                 Whole Agreement.  No agreements, representations or
understandings (whether oral or written, whether express or implied) which are
not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter of this Agreement.  This Agreement constitutes the entire,
complete and integrated Agreement made between the Parties regarding the
subject matter hereof, and supersedes any prior agreements as to such subject
matter.  This Agreement may be modified,
altered or amended by the Parties only be means of a writing dated subsequent
to the date of this Settlement Agreement and signed/acknowledged by the
Parties.  Under no circumstances may this
Agreement be modified orally by any Party.

 

(c)                                  Choice of Law.  The validity, interpretation,
construction, performance of this Agreement shall be governed by the laws of
the State of California, without giving effect to its conflicts of law
principles.

 

(d)                                 Severability.  The invalidity or unenforceability
of any provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision of this Agreement, which shall remain
full in force and effect.

 

(e)                                  Arbitration.  In the event of any dispute or
controversy arising under or in connection with this Agreement, the parties
first shall attempt to settle the issue by negotiation or other informal means,
to be followed, if necessary by mediation. 
If possible, the mediator shall be Paul Dubow, who served as arbitrator
in the AAA matter.  If such mediation
fails to resolve the dispute or controversy, then the dispute or controversy
shall be settled by binding arbitration, and either party, within one year of
the occurrence of the event giving rise to the claim or controversy or within
the period of the applicable statute of limitations, if shorter, may submit
such claim or controversy to binding arbitration in San Francisco, California,
before one arbitrator in accordance with the Commercial Rules of the
American Arbitration Association then in effect.  Failure to serve notice of arbitration upon
the other within such time shall be deemed a waiver of the right to remedy such
claim or controversy.  Costs shall be
shared, but the arbitrator shall be authorized to award reasonable attorneys’
fees and costs to the prevailing party. 
The parties shall request that all testimony in front of such arbitrator
be transcribed, and that any award be accompanied by findings of fact and a
statement of the reasons for the decision. 
Judgment may be entered on the arbitrator’s award in any court having
competent jurisdiction.  Punitive damages
shall not be awarded.  The provisions of
this subsection constitute a complete defense to, and may be asserted or
pleaded successfully as such, in any motion to a court of competent
jurisdiction for a stay of any action or proceeding commenced contrary to the
intent of this provision.

 

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(f)  Attorneys’ Fees and Costs. 
Each Party shall bear its own attorneys’ fees, costs, and other expenses
incurred in connection with the Arbitration, this Agreement, and the dismissal
of the arbitration, including but not limited to the costs of expert witnesses
and consultants.

 

(g)                                 No Assignment of Benefits.   The rights
of any person to payments or benefits under this Agreement shall not be made
subject to option or assignment, either by voluntary or involuntary assignment
or by operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor’s process, and any action in violation of this
paragraph shall be void.

 

(h)                                 Assignment by Company.     Company may assign its rights under this Agreement only to a successor or
other affiliated company.

 

(i)                                     Construction.                       Headings in this Agreement are for reference purposes
only and do not affect the provisions of this Agreement.  Pronouns are used without regard to gender or
number.  The language of this Agreement
shall be construed as a whole according to its fair meaning and not strictly
for or against any of the Parties.

 

(j)                                     Notices.    Notices required to be given by the Agreement shall be
given in writing, delivered in hard copy by hand or Federal Express, or other
equivalent carrier, and also may be sent by e-mail, to the addresses for the
Parties listed below:

 

If to Etelos:

 

Etelos, Inc.

26828 Maple Valley Highway - #297

Maple Valley, WA 98038

With e-mail to:

Daniel J.A. Kolke, Chairman — danny.kolke@etelos-inc.com

Kennedy A. Brooks, VP & GC — kennedy.brooks@etelos-inc.com

 

If to Garon:

 

Jeffrey Garon

35 Tulip Court

Burlingame, CA  94101

With e-mail to: 
jgaron@mindspring.com

 

(k)                              Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
follows:

 

	
  DATED: December       , 2009

  	
   

  	
   

  
	
   

  	
   

  	
  JEFFREY L. GARON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATED: December       , 2009

  	
   

  	
   

  
	
   

  	
   

  	
  ALESIA GARON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATED: December       , 2009

  	
  THE JEFFREY AND ALESIA GARON FAMILY

  
	
   

  	
  TRUST DATED AUGUST 22, 2002

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  JEFFREY L. GARON, Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  ALESIA GARON, Trustee

  
	
   

  	
   

  	
   

  
	
  DATED: December       , 2009

  	
  ETELOS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

11Exhibit 10.14.2

 

FIRST AMENDMENT

TO

MANAGEMENT SERVICES AGREEMENT

 

THIS
FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT (this “Amendment”) is
made and entered into as of March 15, 2010, but effective as of January 1,
2010, by and between Hilltop Holdings Inc., a Maryland corporation (together
with its subsidiaries, affiliates and successors, the “Client”), and
Diamond A Administration Company, LLC, a Delaware limited liability company
(together with its successors, “Advisor”).  Each initially capitalized term used but not
otherwise defined herein shall have the meanings assigned to it in the
Management Services Agreement (hereinafter defined).

 

RECITALS:

 

WHEREAS,
Client and Advisor are parties to that certain Management Services Agreement,
dated as of April 28, 2008 (the “Management Services Agreement”);
and

 

WHEREAS,
Client and Advisor desire to amend the Management Services Agreement to the
extent provided in this Amendment.

 

AGREEMENT:

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained in this
Amendment and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:

 

1.                                       Amendments to
the Management Services Agreement.

 

(a)                                  Section 2
of the Management Services Agreement is hereby deleted in its entirety and
replaced with the following:

 

“2.                                 Term.  The term (the “Term”) of this
Agreement shall continue until terminated pursuant to Section 5
hereof.”

 

(b)                                 Section 3
of the Management Services Agreement is hereby deleted in its entirety and
replaced with the following:

 

“3.                                 Compensation.  As compensation for Advisor’s services to
Client hereunder and the rental of office space as provided in Section 9
hereof, the Client hereby agrees to pay Advisor $104,000 per calendar month
(the “Monthly Management Fee”), prorated on a daily basis for any
partial calendar month, during the Term; provided, however,
until such time as office space is made available by Advisor to Client pursuant
to Section 9 hereof, the Monthly Management Fee shall be $100,000
per calendar month.  The Monthly
Management Fee for each calendar month shall be payable in advance on the first
business day of each calendar month (each a “Payment Date”).”

 

(c)                                  The following
shall be added as an additional section to the Management Services Agreement:

 

1

 

“9.                                 Office Space.  Advisor shall provide Client with office
space pursuant to a lease that Advisor or one of its affiliates, as the case
may be, is a party to in the building commonly known as 200 Crescent Court,
Dallas, Texas 75201.  Said office space
made available by Advisor to Client shall consist of a minimum of two offices
and one secretarial station.  Advisor
also shall permit Client to use, on a reasonable basis, other facilities within
such office space, including, without limitation, conference rooms, kitchen and
reception area.  Advisor also shall make
available, free of charge, to Client office supplies that it generally makes
available to its employees working within such space.”

 

2.                                       Miscellaneous.

 

(a)                                  Effect of Amendment.  Each of Advisor and Client
hereby agree and acknowledge that, except as expressly provided in this
Amendment, the Management Services Agreement remains in full force and effect
and has not been modified or amended in any respect, it being the intention of
each Advisor and Client that this Amendment and the Management Services
Agreement be read, construed and interpreted as one and the same
instrument.  To the extent that any
conflict exists between this Amendment and the Management Services Agreement,
the terms of this Amendment shall control and govern.

 

(b)                                 Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.  This Amendment will become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.  For purposes of
determining whether a party has signed this Amendment or any document
contemplated hereby or any amendment or waiver hereof, only a handwritten
original signature on a paper document or a facsimile or portable document
format (pdf) copy of such a handwritten original signature shall constitute a
signature, notwithstanding any law relating to or enabling the creation,
execution or delivery of any contract or signature by electronic means.

 

SIGNATURE PAGE FOLLOWS

 

2

 

IN
WITNESS WHEREOF, each of Advisor and Client has executed this Amendment as of
the day and year first above written.

 

	
   

  	
  CLIENT:

  
	
   

  	
   

  
	
   

  	
  Hilltop Holdings Inc.,

  
	
   

  	
  a Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ DARREN PARMENTER

  
	
   

  	
  Name: 

  	
  Darren Parmenter

  
	
   

  	
  Title: 

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADVISOR:

  
	
   

  	
   

  
	
   

  	
  Diamond A Administration Company, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ GARY SHULTZ

  
	
   

  	
  Name: 

  	
  Gary Shultz

  
	
   

  	
  Title: 

  	
  Vice President

  

 

3

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