SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS

This Settlement Agreement and Release of Claims (this “Agreement”) is made and entered into this 24th day of January, 2007, by and between SEI LLC, assignee of SEI Information Technology, Inc. (.“SEI”),and XFormity, Inc., a Texas Corporation (“XFormity”). SEI and XFormity are sometimes collectively referred to in this Agreement as “the Parties.”

NOW, THEREFORE, in consideration of the promises and covenants made herein, and for other good and valuable consideration, the Parties hereby agree as follows:

XFormity agrees to pay to SEI the aggregate sum of $20,000 (the “Consideration”). The Consideration shall be paid in five (5) equal monthly installments of $4,000 each, with the first payment due on or before January 31, 2007, and each subsequent installment due on or before the last day of each succeeding month, with the final installment due on or before May 31, 2007. In the event of a default by XFormity in the payment of any monthly installment, which default is not cured within five (5) business days after written notice from SEI, the entire unpaid balance of the Consideration shall immediately become due and payable in full.

A.   In exchange for the other Parties’ promises and covenants herein, including the Consideration provided for in Paragraph 1 above, the sufficiency of which is hereby acknowledged, SEI, for itself, and all of its present and former officers, directors, employees, agents, insurers, attorneys, parents, affiliates subsidiaries and successors and assigns, hereby releases, acquits and forever discharges Xformity and its parent corporation, XFormity Technologies, Inc., a Colorado corporation, and all of their present and former officers, directors, employees, agents, insurers, benefit plans (and related persons/entities), attorneys, parents, affiliates, subsidiaries, and successors and assigns, (collectively referred to as the “XFormity Released Parties”), from any and all charges, complaints, grievances, actions, suits, liabilities, obligations, promises, agreements, demands, controversies, rights, claims and causes of action of whatever kind or nature, whether known or unknown, including claims brought under any federal, state or local statute, ordinance or under common law, and all manner of claims, demands, causes of action, judgments, actions, suits, levies, executions, and liabilities of whatever nature, known or unknown, fixed or contingent, liquidated or unliquidated, indirect or direct, foreseen or unforeseen, which SEI may have had, may have, or may come to have against the XFormity Released Parties, at any time by reason of, in any way connected with, arising out of, bearing upon, or in any way relating to any matter, act, fact, transaction or occurrence or thing occurring prior to the date of execution of this Agreement, including without limitation, all claims pertaining to, arising out of, or bearing upon the Master Services Agreement; provided, however, that nothing stated in this paragraph shall constitute a release of any of Xformity’s obligations under this Agreement, any legal or contractual obligations of Paul Dwyer to SEI, or any of Xformity’s obligations under the surviving provisions of the Master Services Agreement identified in Paragraph 3 of this Agreement (collectively, the “XFormity Surviving Obligations”).

B.   In exchange for the other Parties’ promises and covenants herein, including the consideration provided for in Paragraph 2A above, the receipt and sufficiency of which are hereby acknowledged, the XFormity Released Parties, for themselves, and all of their present and former officers, directors, employees, agents, insurers, attorneys, parents, affiliates subsidiaries and successors and assigns, hereby irrevocably and unconditionally release, acquit and forever discharge SEI, and all of its present and former officers, directors, employees, agents, insurers, benefit plans (and related persons/entities), attorneys, parents, affiliates, subsidiaries, and successors and assigns, (collectively referred to as the “SEI Released Parties”), from any and all charges, complaints, grievances, actions, suits, liabilities, obligations, promises, agreements, demands, controversies, rights, claims and causes of action of whatever kind or nature, whether known or unknown, including claims brought under any federal, state or local statute, ordinance or under common law, and all manner of claims, demands, causes of action, judgments, actions, suits, levies, executions, and liabilities of whatever nature, known or unknown, fixed or contingent, liquidated or unliquidated, indirect or direct, foreseen or unforeseen, which the XFormity Released Parties may have had, may have, or may come to have against the SEI Released Parties, at any time by reason of, in any way connected with, arising out of, bearing upon, or in any way relating to any matter, act, fact, transaction or occurrence or thing occurring prior to the date of execution of this Agreement, including without limitation, all claims pertaining to, arising out of, or bearing upon the Master Services Agreement; provided, however, that nothing stated in this paragraph shall constitute a release of any of SEI’s obligations under this Agreement or any of SEI’s obligations under the surviving provisions of the Master Services Agreement identified in Paragraph 3 of this Agreement (collectively, the “SEI Surviving Obligations”).

     C.     Other than the XFormity Surviving Obligations and the SEI Surviving Obligations, the parties understand and expressly agree that the General Mutual Release contained in Paragraphs 2A and 2B above extends to all claims of every nature