SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (this "Agreement") is entered
into this 19th day of April, 2004, by and among Reality Wireless Networks, Inc.,
a Nevada corporation ("RWNT"), Xxx Xxxxxxx, an individual residing in California
and the Xxxxxxx Family Trust (Xxx Xxxxxxx and the the Xxxxxxx Family Trust being
collectively referred to herein as "Xxxxxxx"). RWNT and Xxxxxxx shall be
referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, Xxxxxxx (i) is the holder of a convertible promissory note
executed by RWNT, as maker, in the aggregate amount of $20,000 dated May 31,
2002, a copy of which is attached hereto as Exhibit A (the "Note"), and (ii)
entered into a Preferred Stock and Warrant Purchase Agreement with RWNT on or
around June 20, 2002, a copy of which is attached hereto as Exhibit B (the
"PSWPA") (the Note and the PSWPA shall collectively be referred to herein as the
"Investment Agreements"). By virtue of the Investment Agreements, Xxxxxxx is
also entitled to receive warrants to purchase shares of the common stock of RWNT
(the "Warrants"). The Note, the PSWPA and the Warrants shall collectively be
referred to herein as the "Debt".
WHEREAS, Xxxxxxx alleges that it is currently owed approximately
$23,667 by RWNT in connection with and pursuant to the Note (the "Outstanding
Debt").1
WHEREAS, RWNT and Xxxxxxx desire to amicably settle, compromise and
resolve any and all controversies and claims between themselves, including, but
not limited to, all controversies and claims between themselves with respect to
the Debt and the Outstanding Debt (the Debt and the Outstanding Debt shall
collectively be referred to herein as the "Settlement Issues") to avoid the
burden and expense of arbitration and/or litigation.
WHEREAS, in connection with the resolution of such matters, Xxxxxxx
shall provide RWNT with a full release and settlement in accordance with the
terms hereinafter set forth.
NOW, THEREFORE, it is the desire of the Parties to state in writing the
details of their agreements. For money paid and received and other valuable
consideration between the Parties, it is mutually agreed as follows:
1. Settlement of Claims against and Release of RWNT. In exchange for
RWNT issuing to Xxxxxxx 2,366,700 restricted shares of common stock of RWNT (the
"Stock"), which Stock shall be issued after receipt by RWNT of this fully
executed Agreement, Xxxxxxx, on behalf of itself, its employees, affiliates and
assigns, hereby fully, forever, irrevocably and unconditionally settles with,
releases, remises and discharges RWNT and each of its former, current and future
officers, directors, stockholders, attorneys, agents, spouses, administrators,
employees and all persons acting by, through, under, or in concert with them
from any and all claims, charges, complaints, demands, actions, causes of
action, suits, rights, debts, sums of money, costs, accounts, reckonings,
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(1) The Outstanding Debt is the combination of the $20,000 face value of the
Note plus $3,667 in interest, at the rate of 5% per annum, as of March 2, 2004.
covenants, contracts, agreements, promises, doings, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys' fees
and costs), of every kind and nature, known or unknown, which Xxxxxxx ever had
or now has against RWNT, including, but not limited to, all claims arising out
of the Settlement Issues, all common law claims including, but not limited to,
actions in tort, defamation, breach of contract, and any claims under federal,
state or local statutes or ordinances not expressly referred to above.
2. Issuance of the Stock to Xxxxxxx. Promptly after the execution of
this Agreement, the Group shall deliver to Xxxxxxx certificate(s) representing
the Stock or evidence of direction and authority given to the proper transfer
agent to issue the Stock and to deliver such certificate(s). The Stock to be
issued, when issued and delivered in accordance with this Agreement, shall be
duly authorized, validly issued, fully paid, and non-assessable.
3. Investment.
3.1 Knowledge of Investment and its Risks. Xxxxxxx has knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of Xxxxxxx'x investment in the Stock. Xxxxxxx understands
that an investment in RWNT represents a high degree of risk and there is no
assurance that the business or operations of RWNT will be successful. Xxxxxxx
has considered carefully the risks attendant to an investment in RWNT and that,
as a consequence of such risks, Xxxxxxx could lose Xxxxxxx'x entire investment
in RWNT.
3.2 Investment Intent. Xxxxxxx hereby represents and warrants
that (i) it is acquiring the Stock for investment for his own account, and not
as a nominee or agent and not with a view to the resale or distribution of all
or any part of the Stock, and Xxxxxxx has no present intention of selling,
granting any participation in or otherwise distributing any of the Stock within
the meaning of the Securities Act of 1933, as amended (the "Securities Act") and
(ii) Xxxxxxx does not have any contracts, understandings, agreements or
arrangements with any person and/or entity to sell, transfer or grant
participations to such person and/or entity, with respect to any of the Stock.
3.3 Accredited Investor. Xxxxxxx is an "Accredited Investor" as
that term is defined by Rule 501 of Regulation D promulgated under the
Securities Act.
3.4 Disclosure. Xxxxxxx has reviewed information provided by
RWNT in connection with the decision to acquire the Stock. RWNT has provided
Xxxxxxx with all the information that Xxxxxxx has requested in connection with
the decision to acquire the Stock. Xxxxxxx further represents that it has had an
opportunity to ask questions and receive answers from RWNT regarding the
business, properties, prospects and financial condition of RWNT. All such
questions have been answered to the full satisfaction of Xxxxxxx.
3.5 Registration. Xxxxxxx understands that it must bear the
economic risk of his investment in RWNT and the Stock for an indefinite period
of time. Xxxxxxx further understands that (i) neither the offering nor the sale
of the Stock has been registered under the Securities Act or any applicable
State securities laws ("State Acts") or securities laws of other applicable
jurisdictions in reliance upon exemptions from the registration requirements of
such laws, (ii) the Stock must be held by Xxxxxxx indefinitely unless the sale
or transfer thereof is subsequently registered under the Securities Act and any
applicable State Acts, or an exemption from such registration requirements is
available, (iii) RWNT is under no obligation to register any of the Stock on
Xxxxxxx'x behalf or to assist Xxxxxxx in complying with any exemption from
registration, and (iv) RWNT will rely upon the representations and warranties
made by Xxxxxxx in this Agreement in order to establish such exemptions from the
registration requirements of the Securities Act and any applicable State Acts or
securities laws of other applicable jurisdictions.
3.6 Transfer Restrictions. Xxxxxxx will not transfer any of the
Stock unless such transfer is exempt from registration under the Securities Act
and such State Acts and securities laws of other applicable jurisdictions, and,
if requested by RWNT, Xxxxxxx has furnished an opinion of counsel satisfactory
to RWNT that such transfer is so exempt. Xxxxxxx understands and agrees that (i)
the certificates evidencing the Stock will bear appropriate legends indicating
such transfer restrictions placed upon the Stock, (ii) RWNT shall have no
obligation to honor transfers of any of the Stock in violation of such transfer
restrictions, and (iii) RWNT shall be entitled to instruct any transfer agent or
agents for the securities of RWNT to refuse to honor such transfers.
4. Representations and Warranties of the Parties.
4.1 Authority. Each of the Parties has full power and authority
to enter into this Agreement. All action on the part of each of the Parties
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of each of the Parties hereunder has been taken,
and each of the Parties has all requisite power and authority to enter into this
Agreement.
4.2 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by each of the Parties does not, and the performance
of this Agreement by the Parties will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority. The execution, delivery and performance of
this Agreement by the Parties does not (i) conflict with or violate the charter
or by-laws, partnership or other governing documents of any of the Parties, or
(ii) conflict with or violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination, contract or award applicable to any of the
Parties.
4.3 Effectiveness of Representations and Warranties. Each of the
Parties' representations and warranties contained in this Agreement are true and
correct.
5. Miscellaneous Provisions.
5.1 This Agreement constitutes the complete and exclusive
agreement of the Parties.
5.2 The Parties understand that this Agreement constitutes a
compromise and settlement of disputed claims. No action taken by the Parties
hereto, or any of them, either previously or in connection with this Agreement
shall be deemed to be (a) an admission of the truth or falsity of any claims
heretofore made or (b) an acknowledgement or admission by either party of any
fault or liability whatsoever to the other Party or to any third party.
5.3 Each of the Parties declares and represents that no promise,
inducement or agreement which is not specifically provided in this Agreement has
been made by any Party to this Agreement; that this Agreement contains the
entire agreement among the Parties; and that the terms of this Agreement cannot
be modified except in writing signed by all Parties hereto.
5.4 Each of the Parties agrees not to disclose to or discuss
with any person, except as where such disclosure may be required by law, court
order, government agency request or subpoena, or in connection with a legal
proceeding, the substance of this Agreement or matters relating to any act or
omission of any Party in connection with any other Party.
5.5 This Agreement shall be construed, interpreted and applied
in accordance with the substantive laws of the State of Washington, without
reference to its choice of law rules.
5.6 Any dispute between the Parties pertaining to this Agreement
shall be resolved through binding arbitration conducted by the American
Arbitration Association. The Parties agree that any arbitration proceeding shall
be conducted in Seattle, Washington, and consent to exclusive jurisdiction and
venue there. The award of the arbitrator(s) shall be final and binding, and the
Parties waive any right to appeal the arbitral award, to the extent that a right
to appeal may be lawfully waived. Each Party retains the right to seek judicial
assistance (a) to compel arbitration, (b) to obtain injunctive relief and
interim measures of protection pending arbitration, and (c) to enforce any
decision of the arbitrator(s), including but not limited to the final award.
5.7 No Party may assign any of its rights under this Agreement
without the prior consent of the other Parties, which shall not be unreasonably
withheld. Subject to the preceding sentence, this Agreement shall apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the Parties. Nothing expressed or referred to in this
Agreement shall be construed to give any person other than the Parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
Parties to this Agreement and their successors and assigns.
5.8 All notices, demands and communications hereunder shall be
in writing and personally delivered or sent by first class mail, certified or
registered, postage prepaid, return receipt requested, addressed to the parties
at the addresses below set forth, or at such other address as any Party shall
have furnished to the other party in writing, or shall be given by telegram,
telex, facsimile transmission, overnight courier or hand delivery, in any case
to be effective when received, provided that actual receipt shall constitute
notice regardless of method of delivery.
If to RWNT: Reality Wireless Networks, Inc.
000 X. Xxxxxxxx Xxx., Xxxxx X
Xxxxxxxx, Xxxxxxxxxx 00000
With a copy to: Xxxxx X. Xxxx
The Xxxx Law Group, PLLC
000 Xxxxxx Xxx., Xxxxx 0000
Xxxxxxx, XX 00000
If to Xxxxxxx: Xxx Xxxxxxx
Xxxxxxx Family Trust
29 Galileo
Xxxxxx, XX 00000
5.9 If any term or provision of this Agreement or any
application thereof shall be invalid or unenforceable, such term or provision
shall be deemed to be severed and the remainder of this Agreement and any other
application of such term or provision shall not be affected or invalidated
thereby.
5.10 This Agreement may be executed by facsimile and in one or
more counterparts, all of which taken together shall constitute one and the same
instrument.
5.11 Put Option. In the event RWNT receives $2,000,000 or more
through the offering of its equity securities within six (6) months from the
date of this Agreement (a "Funding"), RWNT hereby irrevocably undertakes to
allow Xxxxxxx to exchange the Stock with RWNT for $23,667 (the "Put Payment").
Such option to exchange the Stock for the Put Payment shall be hereafter
referred to as the "Put Option".
(a) Duration. Xxxxxxx shall be entitled to exercise his Put
Option during a period which shall commence immediately after the signing of
this Agreement and expire six (6) months thereafter (the "Put Option Period").
Upon expiration of the Put Option Period, Xxxxxxx shall forfeit the right under
this Agreement to request that his Stock be exchanged for the Put Payment.
(b) Restrictions. Xxxxxxx shall exercise his Put Option in
whole.
(i) Xxxxxxx shall be deemed to have irrevocably waived any right
under this Agreement in the event it has not entirely exercised his Put Option
in advance of any of the following events (the "Acceleration Events"): (i) trade
sale to an unrelated party of more than 50% of the stock of RWNT or of assets of
RWNT representing over 50% of the value of RWNT, or (ii) any merger or split-off
of RWNT, or any other similar corporate restructuring of RWNT in which RWNT is
not the survivor, or (iii) winding up of RWNT or any other liquidation
procedure.
(c) Completion. Xxxxxxx will notify RWNT (with copy to The Xxxx
Law Group, PLLC) of Xxxxxxx'x decision to exercise the Put Option.
(i) The exchange of the Stock for the Put Payment shall take
place promptly after the notification is received by RWNT.
(ii) RWNT shall notify Xxxxxxx of a Funding within fifteen (15)
days of the date upon which $2,000,000 has been deposited in a bank account
under the direct control of RWNT.
[signature page follows]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
REALITY WIRELESS NETWORKS, INC.
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Name: Xxxxx Xxxxxxx
Title: CEO
XXXXXXX FAMILY TRUST
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Name: Xxx Xxxxxxx
Title:
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By: Xxx Xxxxxxx, Individually
Exhibit A
Exhibit B
