-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dt2q4onG2r24fjZpsB/73lnqLUvN10vt3fEeNFLHvOqODL+QRHsAge+nKxygJ6Ks iTjRf38DD2QJK/uue5UZSg== 0001096906-06-000552.txt : 20060602 0001096906-06-000552.hdr.sgml : 20060602 20060601174218 ACCESSION NUMBER: 0001096906-06-000552 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20060526 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060602 DATE AS OF CHANGE: 20060601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIRTRAN CORP CENTRAL INDEX KEY: 0000813716 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 680121636 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-49654 FILM NUMBER: 06880965 BUSINESS ADDRESS: STREET 1: 4125 SOUTH 6000 WEST CITY: WEST VALLEY CITY STATE: UT ZIP: 84128 BUSINESS PHONE: 8019635112 MAIL ADDRESS: STREET 1: 4125 SOUTH 6000 WEST CITY: WEST VALLEY CITY STATE: UT ZIP: 84128 FORMER COMPANY: FORMER CONFORMED NAME: VERMILLION VENTURES INC DATE OF NAME CHANGE: 20000502 8-K 1 cirtran8k052606.txt CIRTRAN CORPORATION FORM 8-K MAY 26, 2006 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of report (Date of earliest event reported): May 26, 2006 ------------------ CirTran Corporation - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Nevada - -------------------------------------------------------------------------------- (State of Other Jurisdiction of Incorporation) 0-26059 68-0121636 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 4125 South 6000 West, West Valley City, Utah 84128 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 801.963.5112 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 1.01 Entry into a Material Definitive Agreement Item 3.02 Unregistered Sales of Equity Securities On May 26, 2006, Diverse Media Group Corp. ("DMG") a Utah corporation and a wholly-owned subsidiary of CirTran Corporation, a Nevada corporation (the "Registrant") entered into an assignment and exclusive services agreement (the "Services Agreement") with Diverse Talent Group, Inc., a California corporation, ("DT Group") and Christopher Nassif ("Nassif" and together with DT Group, "DT"). The Services Agreement was made effective as of April 1, 2006 (the "Effective Date"). The term of the Services Agreement is for five years, and expires on March 31, 2011. Prior to entering into the Services Agreement, Nassif and DT Group operated a talent agency in Los Angeles, California, with extensive industry contacts. DMG, a subsidiary of the Registrant, was seeking to commence a diversified media business of product marketing, infomercial production, media financing and product merchandising services to the Direct Response and Entertainment Industries. Pursuant to the Services Agreement, DMG and DT entered into an exclusive operations relationship whereby DMG agreed to outsource its talent agency operations to DT and to provide financing to DT to assist in DT's growth. Under the Services Agreement, DMG and DT created a relationship whereby DT would operate exclusively under the DMG business structure. Pursuant to the Services Agreement, DT agreed to provide all creative and operational needs of DMG's talent division. DT agreed to supply these services exclusively to DMG. Additionally, all gross revenues generated from DT's operations after the Effective Date are to be paid to DMG. At the time of signing the Services Agreement, DMG paid to DT an initial payment of $50,000 in consideration of the following: - the right to use the name "Diverse" and be associated with the existing goodwill and reputation of DT; - the right to obtain DT's services on an exclusive basis; - all accounts receivable and contracts receivable of DTGroup as of the Effective Date; and - the assignment by DT of certain talent contracts. As future compensation for services provided, DMG agreed to pay to DT a percentage of the gross profits for the talent contracts entered into between DT and its clients. The percentage ranges from 62.5% to 85%, depending on the type of talent contract and the amount of gross compensation paid under the talent contract. In connection with the Services Agreement, Nassif entered into an employment agreement (the "Employment Agreement") with DMG. Nassif's continued employment with DMG is an express condition of the Services Agreement. Under the 2 Employment Agreement, DMG agreed to cause to be issued to DT options (the "Options") to purchase a total of 2,500,000 shares of the Registrant's common stock, with an exercise price of $0.045 per share. The Options will expire five years from the date of grant if not exercised prior to that date. The Options vest as follows: 500,000 on the date of grant, and an additional 500,000 on each of the next four anniversaries of the Effective Date, subject to Nassif's continued employment with DMG. Additionally, Nassif will receive 5% of the gross margin received by DMG on any new business opportunities generated for DMG through Nassif's personal efforts and contacts (the "New Business Payments"). The New Business Payments may be made in cash or in shares of the Registrant's restricted common stock, subject to compliance with all applicable securities laws. DMG also agreed in the Services Agreement to provide financing to DT, in the form of a non-interest-bearing capital line of credit (the "Capital Line"), not to exceed $200,000, pursuant to a loan agreement (the "Loan Agreement"). DT may make weekly draws not to exceed $20,000, on terms as set forth in the Loan Agreement. In connection with the Loan Agreement, DT and DMG entered into a security agreement (the "Security Agreement"), pursuant to which DT granted to DMG a security interest (the "Security Interest") in all of the personal property of DT, including inventory, accounts, equipment, general intangibles, deposit accounts, and other items listed in the Security Agreement. The Security Interest secures DT's obligations to DMG under the Capital Line. Also in connection with the Loan Agreement, Nassif provided a fraudulent transaction guarantee (the "Guarantee"), pursuant to which Nassif agreed to indemnify DMG and its officers, affiliates, and others against any damages arising out of any fraudulent actions by DT. Item 9.01 Financial Statements and Exhibits (d) Exhibits 10.1 Assignment and Exclusive Services Agreement, dated as of April 1, 2006, by and among Diverse Talent Group, Inc., Christopher Nassif, and Diverse Media Group Corp. (a wholly-owned subsidiary of Cirtran Corporation). 10.2 Employment Agreement between Christopher Nassif and Diverse Media Group Corp., dated as of April 1, 2006. 10.3 Loan Agreement dated as of May 24, 2006, by and among Diverse Talent Group, Inc., Christopher Nassif, and Diverse Media Group Corp. 10.4 Promissory Note, dated May 24, 2006 10.5 Security Agreement, dated as of May 24, 2006, by and between Diverse Talent Group, Inc., and Diverse Media Group Corp. 10.6 Fraudulent Transaction Guarantee, dated as of May 24, 2006. 99.1 Press Release dated June 1, 2006. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CirTran Corporation Date: June 1, 2006 By: /s/ Iehab Hawatmeh ------------------------------ ------------------------------- Iehab J. Hawatmeh, President 4 - -------------------------------------------------------------------------------- EX-10.1 2 cirtran8k052606ex10-1.txt EXHIBIT 10.1 ================================================================================ ASSIGNMENT AND EXCLUSIVE SERVICES AGREEMENT THIS ASSIGNMENT AND EXCLUSIVE SERVICES AGREEMENT is made and entered into this 26th day of May, 2006 to be effective as of April 1, 2006 (the "Effective Date") by and between DIVERSE TALENT GROUP, INC., a California corporation ("DTGroup"), Christopher Nassif ("Nassif" or collectively with DTGroup, "DT") and DIVERSE MEDIA GROUP CORP. ("DMG") a Utah corporation and a wholly-owned subsidiary of Cirtran Corporation, a Nevada corporation. RECITALS A. DT operates as a licensed talent agency in Los Angeles, California. DT has developed extensive industry contacts among both talent and producers. B. DMG is commencing a diversified media business of product marketing, infomercial production, media financing and product merchandising services to the Direct Response and Entertainment Industries. As part of such business, DMG intends to establish an exclusive operations relationship with DT whereby DMG will outsource its talent agency operations to DT and provide financing to DT to assist in its growth. C. The parties intend to create a exclusive relationship between themselves whereby DT operate solely under the DMG infrastructure, as described herein. D. The Term of this agreement shall be for 60 months beginning on April 1st, 2006 and expiring on March 31, 2011. NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. DT Services. During the term of this Agreement, DT will provide the following services to DMG: (a) DT will provide, on an outsource or subcontract basis, all creative and operational needs of the "Talent Division" of DMG (the "Agency Services") by maintaining and, as necessary, growing its present operations. Except for client contracts which DMG expressly allows DT to retain as provided herein, DT will supply the Agency Services exclusively to DMG and will provide all of DMG's reasonable requirements for Agency Services. All services to be provided by DT hereunder shall be performed in a prompt and professional manner consistent with DTGroup's past practices. (b) As provided in paragraph 3, all gross revenues generated from DT's operations shall be directed and made payable to DMG from and after the Effective Date. (c) DMG will be responsible to make payments to the talent on Talent Contracts assigned to it hereunder. 2. Initial Payment. Upon mutual execution of this Agreement, DMG will pay to DT an initial non-recoupable payment of Fifty Thousand Dollars ($50,000.00) in full consideration of the following: (i) the right to use the name "Diverse" and be associated with the existing goodwill and reputation of DT (which rights survive termination of this agreement as outlined in this agreement), (ii) the right to obtain DT's Agency Services on an exclusive basis as described in paragraph 1, (iii) all accounts receivable and contracts receivable of DTGroup as of the Effective Date, and (iv) assignments of the Talent Contracts described in paragraph 3. 3. Assignment of Talent Contracts, First Right of Refusal. DT has attached hereto as Schedule "A" a list of all talent DT has under contract as of the Effective Date (whether exclusively, non-exclusively or for specific projects) with a description of the terms of such contracts. Within 5 business days, DMG will notify DT of any such contracts which DMG declines to assume. With the exception of the contracts which DMG has expressly declined to assume, all of such contracts (the "Talent Contracts") shall be assigned to DMG as of the Effective Date. If any of the Talent Contracts cannot be formally assigned as of the Effective Date due to provisions in the Talent Contract itself or the need for DMG to register as a talent agency, then pending formal assignment DT shall deliver 100% of the gross revenue received under such Talent Contract to DMG. If any of the Talent Contracts requires the consent of the talent for assignment, DT will use its best efforts to obtain such consent in a timely manner. The consideration for assignment of the Talent Contracts is the initial payment described in paragraph 2 and the payments described in paragraph 4. After the Effective Date, DT will present to DMG, in writing, potential new contracts with talent. DMG will have at least five business days to determine whether to sign the talent itself and treat such contract as a Talent Contract. If, but only if, DMG acting through its CEO declines to sign the talent, DT may sign the talent directly. 4. Ongoing Compensation. The compensation for the services rendered hereunder shall be as follows: (a) As used herein, the "Gross Profit" shall mean (i) for Talent Contracts on a standard form such as those used by DT prior to the Effective Date, the entire agent's commission, which has typically been 10% of the gross amount payable to the talent, and (ii) for Talent Contracts where DMG will contract directly with the employer/producer to provide the talent, the difference between the gross revenue received by DMG and the earned amount that DMG must pay to the talent. Gross Profit is recognized for purposes of this Agreement only when payment is actually received by DMG. (b) DT will be responsible to pay for all its direct overhead, labor and expenses to operate its business from its share of Gross Profit paid by DMG in accordance with this paragraph 4. 2 (c) Gross Profit from Talent Contracts in existence as of the Effective Date shall be divided 85% to DTGroup and 15% to DMG (e.g. from the standard 10% agent's commission, DTGroup will receive 8.5% and DMG 1.5%). (d) Marginal Gross Profit from Talent Contracts entered into after the Effective Date shall be divided between DTGroup and DMG based on the cumulative Gross Profit received pursuant to such Talent Contract as set forth in the following schedule: - -------------------------------------------------------------------------------- Cumulative Gross Profit DTGroup share DMG balance - -------------------------------------------------------------------------------- $500,000 or less 62.5% 37.5% - -------------------------------------------------------------------------------- $500,001 to $1,000,000 65.0% 35.0% - -------------------------------------------------------------------------------- $1,000,001 to $1,500,000 67.5% 32.5% - -------------------------------------------------------------------------------- $1,500,001 to $2,000,000 70.0% 30.0% - -------------------------------------------------------------------------------- $2,000,001 to $2,500,000 72.5% 27.5% - -------------------------------------------------------------------------------- Over $2,500,000 75.0% 25.0% - -------------------------------------------------------------------------------- DTGroup's compensation with respect to a payment received under a Talent Contract will be paid within ten (10) days after DMG's receipt of the payment. As an example, if over the term of Talent Contract DMG has received total Gross Profit of $750,000, the total payments to DTGroup with respect to such Talent Contract would be $475,000 (62.5% of $500,000 plus 65% of $250,000) and DTGroup would be paid $0.65 of the next dollar of Gross Profit received under such Talent Contract. 5. Nassif. Unless waived in writing by DMG, it is a condition to this Agreement that Nassif remain employed by DTGroup and active in and responsible for its business. Nassif shall also be employed by DMG as Talent Division President of DMG directly responsible for the Talent and Production divisions of DMG pursuant to an employment agreement on terms mutually acceptable to the parties. In addition, Nassif will be recognized as a co-founder of DMG's Talent Division. The employment agreement will provide that Nassif shall be compensated for new business generated by him for DMG's other divisions in an amount equal to 5.0% of the gross margin actually received by DMG from such business, net of discounts and returns. The employment agreement may provide that up to 50%, (at Nassif's sole discretion provided he notify DMG and its parent company in writing prior to the commencement of said new business operations) of such compensation is payable in the form of stock of DMG's parent corporation,. In addition, Nassif shall be issued 2,500,000 stock options pursuant to the parent corporation's option plan exercisable at $.06 per share with a five year term. The options will vest 20% upon grant and an additional 20% per year, subject to continued employment by DMG, beginning on the first anniversary of the date of the execution of this agreement until fully vested. Nassif shall have mutual approval on all public relations and similar communications relating to the Talent and Production Division Operations. Nassif's employment agreement will provide that he is entitled to reimbursement of all pre-approved business expenses incurred on behalf of DMG or its parent. 3 6. Capital Financing. DTGroup and Nassif agree that DTGroup will maintain sufficient staff and equipment to fully and professionally perform the services required of it hereunder. Upon the request of DT, DMG will make working capital loans to DTGroup to enable it to provide services hereunder. The working capital loans will be on such terms as the parties may mutually agree upon but will not bear interest. As an initial working capital loan, DMG will provide DTGroup with a non-interest bearing working capital line of credit in the amount of $200,000 with weekly draws not to exceed $20,000 on terms to be negotiated by the parties. All outstanding working capital loans will become due and payable upon termination of this Agreement. (a) Capital Investment: It is understood by both parties that it is DMG's intention to commit such capital as is determined by the Boards of Directors of DMG and its parent corporation as they deem reasonably necessary to grow the business operations and revenue of DMG's Talent Division, including but not limited to marketing, public relations, office expansion, attraction of key executives, advertising etc. DMG will consult with Nassif regarding the timing and amount of such capital commitments. 7. Term, Renewal, Termination. (a) This Agreement shall be for an initial term of five years commencing on the Effective Date (the "Initial Term"). (b) This Agreement shall renew for successive terms of five years each unless at least 30 days prior to the end of the Initial term or then-current renewal term either party notifies the others of its intent to not renew. (c) This Agreement may be terminated by either party: (i) if the other party defaults in any payment to the terminating party and such default continues without a cure for a period of 20 days after the delivery of written notice thereof by the terminating party to the other party; (ii) if the other party defaults in the performance of any material term or condition of this Agreement other than the payment of money and such default continues unremedied for a period of 30 days after the delivery of written notice thereof by the terminating party to the other party. (d) To fully vest in DMG the rights to the Diverse name it has purchased hereunder, upon any termination of this Agreement, DTGroup shall promptly change its corporate and business name to remove the word "Diverse". Furthermore, in such event DTGroup agrees that for a period of two years following termination it will not, without DMG's express written consent, (i) represent the talent who were under contract with DMG at the time of termination, or (ii) operate, directly or through an affiliate, a talent agency located within Los Angeles County. 4 8. Buy-Sell Agreement. (a) In the event that this Agreement terminates due to a non-renewal by either party pursuant to paragraph 7(a), then upon termination (i) DTGroup shall have the option to purchase the Talent Division Assets (as defined below) not already owned by it (the "DTGroup Option"), and (ii) DMG will have the option to purchase the Talent Division Assets as defined below (the "DMG Option" or collectively with the DTGroup Option, the "Options") not already owned by it on the terms outlined herein. Each of the parties will have 45 days after the effective date of termination to notify the other party whether or not it desires to exercise its Option. (b) The exercise price of the Options will be equal to 50% of the average annual Gross Profit used in calculating DTGroup's ongoing compensation for the three years preceding termination. (c) If only one of parties desires to exercise its Option, then a closing will occur as soon as practicable after the end of the 45 day period referred to above at which the exercising party pays the exercise price and the non-exercising party transfers to the exercising party the Talent Division Assets owned by the non-exercising party. The exercise price shall be paid in full at closing, and the Talent Division Assets shall be transferred free and clear of all liens, claims and encumbrances, unless the parties mutually agree upon other terms. If DTGroup is the purchasing party, it shall be relieved of the name and non-competition obligations of paragraph 7(d). Both parties agree that in the event DTGroup purchases the Talent Division Assets, DMG will be allowed to operate its remaining business under the Diverse Media Group name. (d) If both parties, or neither party, state a desire to exercise its Option in the 45 day period, and if the parties cannot agree on a sale between themselves on mutually agreeable terms, then the parties shall use their best efforts to sell the Talent Division Assets to a third party on mutually agreeable terms, in which event the sales price (including cash and the value of any assumed debt), net of commissions and other customary costs of sale, shall be divided 50% to DTGroup and 50% to DMG. The parties shall cooperate with each other in good faith throughout the sale process. (e) As used herein, the "Talent Division Assets" shall mean (i) all tangible and intangible assets and rights used by DTGroup in connection with its talent agency business, including any agreements with talent retained or obtained by DTGroup, plus (ii) all intangible asset and rights used by DMG in connection with its Talent Division, including the Talent Contracts and rights to the Diverse name, but excluding any assets used principally for other operating divisions of DMG. 9. Authority. DMG's discretion to accept or approve Talent Contracts under paragraph 3 and to approve the terms of working capital loans under paragraph 6 may only be exercised by writings executed by its Chief Executive Officer. 10. Assignment. This Agreement shall be binding upon the parties and their respective successors and assigns, provided that neither party may 5 assign this agreement without the written consent of the other party. Consent to assignment shall not be unreasonably withheld, provided that the consenting party may require evidence to its reasonable satisfaction that the proposed assignee will be able to perform the obligations of the proposed assignor. 11. Notices. All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by document, overnight delivery service or, to the extent receipt is confirmed, telecopied to the appropriate address or number set forth below. Notice to DT or Nassif shall be addressed to: Diverse Talent Group 1875 Century Park East, Suite 2250 Los Angeles, CA 90067 Attention: Christopher Nassif Fax: __________ Notices to DMG shall be addressed to: Diverse Media Group Corp. 1875 Century Park East, Suite 1790 Los Angeles, CA Fax 310-492-0404 Att: Trevor Saliba With a required copy to: CirTran Corporation 4125 South 6000 West West Valley City, Utah 84128 Attention: Iehab Hawatmeh Fax: 801-963-5180 or at such other address and to the attention of such other person as either party may designate by written notice to the other. 12. Governing Law, Dispute Resolution. This agreement shall be governed by and construed by the laws of the State of Utah, disregarding the conflicts of laws provisions thereof. Any claim, dispute or controversy arising out of, or relating to any section of this Agreement or the making, performance, or interpretation of the rights and obligations explicitly set forth in this Agreement shall, upon the election by written notice of either party, be settled on an expedited basis by binding arbitration in Salt Lake City, Utah before a single arbitrator mutually agreeable to the parties, or if no agreement is reached, before a single arbitrator from the American Arbitration Association selected in accordance with its rules then in effect, which arbitration shall be conducted in accordance with such rules, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of controversy. 13. Attorneys' Fees. In the event of any litigation concerning any controversy, claim or dispute among the parties hereto, arising out of or 6 relating to this Agreement or the breach hereof, or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys' fees, and costs incurred therein or in the enforcement or collection of any judgment or award rendered therein. 14. Amendment and Waiver. Except as otherwise expressly provided herein, any provision of this Agreement may be amended only with the written consent of the parties. No term or provision of this Agreement shall be deemed waived unless such waiver shall be in writing and signed by the party making such waiver. Any waiver of a particular breach of this Agreement shall not constitute a waiver of any other breach, nor shall any waiver be deemed a continuing waiver unless it so states expressly. 15. Entire Agreement; Severability. This Agreement supersedes all proposals, oral or written, all negotiations, conversations or discussions between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom. If any provision of this Agreement is held to be illegal or unenforceable, that provision shall be limited or eliminated to the minimum necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 16. Survival of Obligations. The obligations of confidentiality and exclusivity arising under this Agreement are intended to survive any termination of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. DIVERSE TALENT GROUP, INC. By: /s/ --------------------------------- Name: Title: /s/ ------------------------------------ Christopher Nassif DIVERSE MEDIA GROUP CORP. By: /s/ --------------------------------- Name: Iehab Hawatmeh Title: Chairman and CEO 7 - -------------------------------------------------------------------------------- EX-10.2 3 cirtran8k052606ex10-2.txt EXHIBIT 10.2 ================================================================================ EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") executed on May 26, 2006, by and between Diverse Media Group Corp., a Utah corporation, (the "Company"), and Christopher Nassif ("Executive"). The Company desires to employ the services of Executive on the terms and subject to the conditions of this Agreement, and Executive desires to accept such employment. In consideration of the terms and mutual covenants contained in this Agreement, the Company and Executive agree as follows. 1. Employment. The Company hereby engages the services of Executive as the co-founder of the Talent Division of the Company and the Talent Division President of the Company directly responsible for the Talent and Production divisions of the Company to perform those duties delegated by the Board of Directors of the Company (the "Board") and all other duties consistent with such description, and Executive hereby accepts such employment. Executive shall have mutual approval on all public relations and similar communications relating to the Talent Division & productions by the Company. During the term of this Agreement, Executive shall perform such additional or different duties and accept appointment to such additional or different positions of the Company as may be specified by the Board, provided that such duties are consistent with his title. Executive shall perform his obligations to the Company pursuant to this Agreement under the direction of the Company, and Executive shall devote his full time and reasonable efforts to such performance. Notwithstanding the above, the Company acknowledges that Executive is also the Chairman & CEO of Diverse Talent Group ("DTG"), which is providing services to the Company pursuant to an Assignment and Exclusive Services Agreement effective April 1, 2006, and Executive will divide his time between the Company and DTG. 2. Term. This Agreement shall be effective as of _______, 2006 (the "Effective Date") and shall continue until March 31, 2011, unless sooner terminated by either party as provided in Section 7 hereof. Thereafter, this Agreement shall be automatically renewed on a year-to-year basis after the expiration of the initial or any subsequent term of this Agreement unless terminated by either party as provided in Section 7 hereof. 3. Compensation. (a) For services rendered pursuant to this Agreement, Executive shall receive, commencing on the Effective Date, the following compensation on the following terms: (i) The Company shall cause CirTran to issue Executive options to purchase a total of 2,500,000 shares of the CirTran's common stock. Of these, options for 500,000 shares will be issued pursuant to CirTran's 2004 Stock Plan and options for the remaining 2,000,000 shares will be issued pursuant to CirTran's 2006 Stock Plan. Such options shall be exercisable at $.045 per share and expire five years after the date of grant. The options will vest 20% on the date of grant, which shall be the date of this Agreement, and an additional 20% shall vest on each of the next four anniversaries of the date of this Agreement, subject to continued employment by the Company of Executive. Such terms shall be set forth in a stock option contract and shall be subject to such other terms and conditions as may be determined by the board of directors of CirTran, or a committee thereof. (ii) For purposes of this Agreement, "New Business" shall mean new business opportunities generated for the Company through the personal efforts and contacts of Executive, such as product manufacturing agreements, product endorsement agreements and _______. New Business does not include talent representation of the type previously conducted by DTG nor does it include the extension of any existing agreements to derivative or next generation products. To qualify as New Business, Executive must notify the Company prior to the Company entering into any binding commitments that the proposed transaction is intended to be New Business and the Board and CirTran must expressly accept the proposed transaction as New Business. Executive will use his best efforts to generate New Business. Executive shall receive 5.0% of the gross margin actually received by the Company from such New Business, net of discounts and returns, as applicable (the "New Business Payments"). The New Business Payments will continue during the entire period that the Company is receiving gross margin from the New Business, except as otherwise provided herein. Due to the potential variety of transactions which may constitute New Business, the Board, in its sole discretion, will determine how gross margin will be defined on a transaction by transaction basis. If Executive has so requested in his notice of potential New Business, and subject to compliance with applicable securities laws, the Company shall cause its parent, CirTran Corporation ("CirTran") to provide up to 50% of the New Business Payments due Executive under this paragraph 3(a)(ii) to be payable in the form of restricted common stock of CirTran valued at the trading price of Cirtran's stock on its principal market. New Business Payments not payable in stock will be paid by the 15th of each month with respect to gross margin received in the prior calendar month. (iii) All options and shares of common stock shall be subject to such other terms and conditions as may be determined by the board of directors of CirTran or a committee thereof when and if such options or shares of common stock are issued to Executive. (b) At the first Board of Directors meeting following the execution of this Agreement, the Company's Board of Directors will appoint Executive to the Company's Board and Executive agrees to serve as a director of the Company. Executive will not receive any additional compensation for his service as a director. In the event that this Agreement terminates for any reason, Executive shall immediately resign from the Board of Directors if he is then serving. 4. Employment Benefits. The Company shall not provide Executive employee benefits, it being understood that he will receive benefits through DTG. 5. Expenses. The Company will reimburse Executive for reasonable expenses pre approved in writing by the Board and incurred in connection with its business in accordance with policies established by the Company. 2 6. Termination. Executive's employment by DMG and this Agreement will terminate upon the first to occur of the following: (a) Termination by the Company for "cause," as determined by the Board. For the purposes of this Section 6(a), "cause" shall mean: (i) misfeasance or negligence in the performance of his duties hereunder; (ii) engagement by Executive in dishonest or illegal conduct; or (iii) conviction of a felony. (b) Termination by the Company in the event of Executive's disability. "Disability" will be deemed to exist if Executive has substantially failed to perform the essential functions of his duties hereunder for 180 consecutive days (notwithstanding reasonable accommodation by the Company) for reasons of mental or physical health, or if a physician selected in good faith by the Company examines Executive (and Executive hereby agrees to permit such examinations at the Company's expense) and advises the Company that Executive will not be able to perform the essential functions of his duties hereunder for the following 180 consecutive days. If the Company terminates Executive's employment for Disability, Executive shall receive (i) New Business Payments, as they come due, with respect to New Business for which the Company had contractual rights at the time of termination, and (ii) any other compensation due under this Agreement through the date of termination. Except for the survival of the New Business Payments as set forth in the preceding sentence, the Company will have no further obligation under this Agreement at that time (c) Executive's death. In the event of Executive's death, Executive's estate shall be entitled to continue to receive New Business Payments, as they come due, with respect to New Business for which the Company had contractual rights at the time of Executive's death. Executive's estate shall receive any other compensation due under this Agreement through the date of death. All of Company's other obligations under this Agreement shall terminate immediately. (d) Survival of New Business Payments. Executive' s right to continue to receive New Business Payments shall terminate upon a termination of this Agreement (i) by the Company for cause as described in Section 6(a), (ii) by the Executive, unless Executive terminates due to the Company's material breach and after giving the Company notice of such breach and a reasonable opportunity to cure. 7. Notice of Termination. Any termination of Executive's employment under this Agreement, except for termination for "cause" shall be communicated by a written Notice of Termination (the "Notice") to the other party hereto, which Notice shall specify the particular termination provision in this Agreement relied upon by the terminating party and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for 3 termination under such provision. Any such Notice to the Company shall be delivered to the Company's president or personnel director at its principal place of business. Any such Notice to Executive shall be delivered personally to Executive or delivered to his residence address listed in the Company's personnel records. 8. Agreement Not to Solicit Employees, Customers, or Others. Executive covenants and agrees that, for a period of two years after this Agreement is terminated, he will not, directly or indirectly, (i) solicit, induce or hire away, or assist any third party in soliciting, diverting or hiring away, any employee of the Company, whether or not the employee's employment is pursuant to a written agreement and whether or not such employment is for a specified term or is at will, or (ii) induce or attempt to induce any customer, supplier, dealer, lender, licensee, consultant or other business relation of the Company to cease doing business with the Company. 9. Ownership, Non-Disclosure and Non-Use of Confidential or Proprietary Information. (a) Executive covenants and agrees that while he is employed by the Company and after the termination of his employment he will not, directly or indirectly, (i) give to any person not authorized by the Company to receive it or use it, except for the sole benefit of the Company, any of the Company's proprietary data or information whether relating to products, ideas, designs, processes, research, marketing, customers, management know-how, or otherwise; or (ii) give to any person not authorized by the Company to receive it any specifications, reports, or technical information or the like owned by the Company; or (iii) give to any person not authorized by the Company to receive it any information that is not generally known outside the Company or that is designated by the Company as limited, private, or confidential. (b) Executive covenants and agrees that he will keep himself informed of the Company's policies and procedures for safeguarding the Company property including proprietary data and information and will strictly comply therewith at all times. Executive will not, except when authorized by the Company, remove any Company property from the Company's premises. Executive will return to the Company immediately upon termination of his employment all Company property in his possession or control. 10. Complete Agreement. This Agreement and the Assignment and Exclusive Services Agreement between the Company, Executive and DTG embody the complete agreement and understanding between the parties and supersedes any prior understandings, agreements or representations by or among the parties, whether written or oral, concerning the subject matter hereof in any way. 4 11. Amendments; Waivers. This Agreement may not be amended except by a writing signed by both the Company and Executive. Any waiver by a party hereof of any right hereunder shall be effective only if evidenced by a signed writing, and only to the extent set forth in such writing. 12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of, and be enforceable by the parties hereto and their respective successors, heirs and assigns, except that Executive may not assign any of his obligations hereunder without the prior written consent of the Company. 13. Remedies. Each of the parties to this Agreement will be entitled to specifically enforce its rights under this Agreement, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights to which it may be entitled. Furthermore, Executive agrees that any right to receive New Business Payments following termination of this Agreement is conditioned on Executive's compliance with Sections 8 and 9, and upon any material breach thereof by Executive the Company shall be entitled to cease all further payment of New Business Payments. 14. Notices. Any notice to be given hereunder shall be in writing and shall be effective when personally delivered or sent to the other party by registered or certified mail, return receipt requested, or overnight courier, postage prepaid, or otherwise when received by the other party, at the address set forth at the end of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above to be effective as of the Effective Date. DIVERSE MEDIA GROUP CORP. By: /s/ ------------------------------------- Name: Iehab Hawatmeh Title: Chairman Address: 1875 Century Park East, Suite 1790 Los Angeles, CA 90067 EXECUTIVE: /s/ ------------------------------------- Christopher Nassif Address: [c/o Diverse Talent Group] 1875 Century Park East, Suite 2250 Los Angeles, CA 90067 5 - -------------------------------------------------------------------------------- EX-10.3 4 cirtran8k052606ex10-3.txt EXHIBIT 10.3 ================================================================================ LOAN AGREEMENT Between DIVERSE MEDIA GROUP CORP. Lender and DIVERSE TALENT GROUP, INC. Borrower CHRISTOPHER NASSIF Fraudulent Transaction Guarantor Dated as of May 24, 2006 LOAN AGREEMENT Table of Contents 1. Definitions.............................................................1 1.1 Definitions.............................................................1 2. Loan Description........................................................4 2.1 Commitment..............................................................4 2.2 Borrowing Procedures....................................................4 2.3 Conditions to Each Loan.................................................5 2.4 Note....................................................................5 2.5 Due Date................................................................5 2.6 Prepayments.............................................................5 3. Security for Obligations................................................6 4. Fraud Guarantee.........................................................6 5. Effectiveness; Conditions to Loan Disbursements.........................6 5.1 Initial Loan............................................................6 5.2 All Loans...............................................................7 6. Representations and Warranties..........................................7 6.1 Organization and Qualification..........................................7 6.2 Authorization...........................................................7 6.3 No Liens................................................................7 6.4 No Governmental Approval Necessary......................................8 6.5 Accuracy of Financial Statements........................................8 6.6 No Pending or Threatened Litigation.....................................8 6.7 Full and Accurate Disclosure............................................8 6.8 Compliance with All Applicable Law......................................8 6.9 Operation of Business...................................................8 6.10 Payment of Taxes........................................................9 6.11 Subsidiaries............................................................9 7. Borrower's Covenants....................................................9 7.1 Use of Proceeds.........................................................9 ii 7.2 Continued Compliance with Applicable Law................................9 7.3 Prior Consent for Amendment or Change...................................9 7.4 Payment of Taxes and Obligations.......................................10 7.5 Financial Statements, Reports and Tax Returns..........................10 7.6 Financial Covenants....................................................10 7.7 Limitations on Debt....................................................11 7.8 Limitations on Loans...................................................11 7.9 Limitations on Operating Leases........................................11 7.10 Restricted Payments....................................................11 7.11 Liens..................................................................11 7.12 Investments............................................................12 7.13 Mergers, Consolidations, Sales.........................................12 7.14 Subsidiaries...........................................................12 7.15 Insurance..............................................................12 7.16 Inspection.............................................................12 7.17 Operation of Business..................................................12 7.18 Maintenance of Records and Properties..................................13 7.19 Notice of Default, Litigation..........................................13 7.20 Maintenance of Existence, etc..........................................13 7.21 Further Assurances.....................................................13 8. Default................................................................13 8.1 Events of Default......................................................13 8.2 No Waiver of Event of Default..........................................15 9. Remedies...............................................................15 9.1 Remedies upon Event of Default.........................................15 9.2 Rights and Remedies Cumulative; No Waiver of Rights....................16 9.3 Offset.................................................................16 10. General Provisions.....................................................16 10.1 Governing Agreement....................................................16 10.2 Borrower's Obligations Cumulative......................................17 10.3 Payment of Expenses and Attorney's Fees................................17 iii 10.4 Right to Perform for Borrower..........................................17 10.5 Assignability..........................................................17 10.6 Third Party Beneficiaries..............................................18 10.7 Governing Law..........................................................18 10.8 Severability...........................................................18 10.9 Interpretation of Loan Agreement.......................................18 10.10 Survival and Binding Effect of Representations, Warranties, and Covenants.........................................................18 10.11 Indemnification........................................................19 10.12 Interest on Expenses and Indemnification, Collateral, Order of Application...........................................................19 10.13 Limitation of Consequential Damages....................................19 10.14 Revival Clause.........................................................19 10.15 Governing Law; Dispute Resolution......................................20 10.16 Notices................................................................20 10.17 Counterparts...........................................................21 10.18 Disclosure of Financial and Other Information..........................21 10.19 Integrated Agreement and Subsequent Amendment..........................21 EXHIBITS Exhibit A - Note Exhibit B - Fraudulent Transaction Guarantee iv Loan Agreement This Loan Agreement is made and entered into by and between Diverse Media Group Corp. ("Lender"), a Utah corporation and a wholly owned subsidiary of CirTran Corporation, a Nevada corporation, and Diverse Talent Group, Inc., a California corporation ("Borrower"), and Christopher Nassif, an individual ("Fraud Guarantor"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions ----------- 1.1 Definitions ----------- Terms defined in the singular shall have the same meaning when used in the plural and vice versa. As used herein, the term: "Business Day" means any day not a Saturday, Sunday or legal holiday in the State of California. "Change of Control" means (a) the acquisition by any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of 20% or more of the outstanding shares of common stock of the Borrower; or (b) during any 12-month period, individuals who at the beginning of such period constituted Borrower's Board of Directors (together with any new directors whose election by Borrower's Board of Directors or whose nomination for election by Borrower's shareholders was approved by a vote of a majority of the directors who either were directors at beginning of such period or whose election or nomination was previously so approved) ceasing for any reason to constitute a majority of the Board of Directors of Borrower. "Commitment" means the commitment of Lender hereunder to make Loans to Borrower. The initial amount of the Commitment is Two Hundred Thousand Dollars ($200,000.00). "Compliance Certificate" means a compliance certificate in a form acceptable to Lender certifying Borrower's status regarding Borrower's compliance with all terms and conditions of this Loan Agreement, including compliance with the financial covenants provided in Section 7.6. The Compliance Certificate shall include the data and calculations supporting all financial covenants, whether in compliance or not, and shall be signed by the president or chief financial officer of Borrower. "Collateral" shall have the meaning set forth in Section 3. 1 "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of property or services (other than trade payables and current operating liabilities not for borrowed money, entered into in the ordinary course of business on ordinary terms that are not more than 90 days past due, unless contested in good faith and by appropriate proceedings); (c) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations of such Person with respect to capital leases; and (f) all guarantees of such Person of any Debt of another Person. "Disposition" means any transaction, or series of related transactions, pursuant to which any Person or any of its subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person. "Distribution" means any distribution of any kind, whether in cash, securities or in kind, from any Person to any other Person. "Effective Date" shall mean May 24, 2006. "Employment Agreement" shall mean the Employment Agreement between Lender and Fraud Guarantor effective as of May __, 2006. "Event of Default" shall have the meaning set forth in Section 8.1. "Exclusive Services Agreement" means the Assignment and Exclusive Services Agreement effective as of April 1, 2006 by and between the Borrower, the Fraud Guarantor and the Lender. "Fraud Guarantee" means the fraudulent transaction guarantee described in Article 4 in the form of Exhibit B hereto, which is incorporated herein by reference, and any and all amendments, modifications, addendums and replacements. "Insolvency Proceeding" means, without respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors (including any proceeding under the United States Bankruptcy Code) or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of such Person's creditors generally or any substantial portion of such creditors. 2 "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, or any financing lease having substantially the same economic effect as any of the foregoing, but not including the interest of a lessor under an operating lease). "Loan" or "Loans" has the meaning set forth in Section 2.1. "Loan Agreement" means this agreement, together with any exhibits, amendments, addendums, and modifications. "Loan Documents" means the Loan Agreement, Note, Fraud Guarantee, Security Documents, all other agreements and documents contemplated by any of the aforesaid documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise), profits or prospects of Borrower or Fraud Guarantor; or (b) a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower or Fraud Guarantor of any Loan Document. "Note" means the promissory note to be executed by Borrower pursuant to Section 2.4 in the form of Exhibit A hereto, which is incorporated herein by reference, and any and all renewals, extensions, modifications, and replacements thereof. "Obligations" means the Loans, the Note, and all obligations of Borrower under the Loan Documents. "Organizational Documents" means the Articles of Incorporation and Bylaws and all amendments, modifications, and changes to any of the foregoing which are currently in effect. "Person" means any natural person, corporation, partnership, limited liability company, trust, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. "Restricted Payment" means any Distribution, Disposition or payment of cash or property, or both, directly or indirectly, to any shareholder or other Affiliate of the Borrower. "Security Documents" means all security agreements, assignments, pledges, financing statements, deeds of trust, mortgages, and other documents which create or evidence any security interest, assignment, lien or other encumbrance in favor of Lender to secure any or all of the Obligations, and all 3 amendments, modifications, addendums, and replacements, whether presently existing or created in the future. "Service Agreement Receivables" at any time means the amount Borrower would be paid pursuant to the Exclusive Services Agreement if all valid accounts receivable of Lender at that time (whether acquired by Lender at the time of the Exclusive Services Agreement or thereafter generated by Lender and Borrower) were to be immediately collected. The valid accounts receivable of Lender do not include any accounts which Lender in its reasonable judgment has written off, determined to be uncollectible or fully reserved against. "Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests is owned or controlled directly or indirectly by such Person, or by one or more of the Subsidiaries of such Person, or by a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of Borrower. "Termination Date" has the meaning set forth in Section 2.1. "Unmatured Event of Default" means any event which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. 2. Loan Description ---------------- 2.1 Commitment ---------- Subject to the terms and conditions of this Loan Agreement, Lender agrees to make loans to Borrower on a revolving basis (collectively the "Loans" and individually each a "Loan") from time to time before April 30, 2011 (the "Termination Date"), in such amounts in the aggregate at any one time outstanding as Borrower may from time to time request; provided, however, that the aggregate outstanding principal amount of all Loans shall not at any one time exceed $200,000.00, and the amount of any single Loan, or the total of all Loans originated in any seven-day period, shall not exceed $20,000. Borrower may borrow, repay and reborrow Loans from time to time before the Termination Date in accordance with the provisions of this Loan Agreement. 2.2 Borrowing Procedures -------------------- Lender shall receive prior written or telephonic notice from Borrower of each proposed Loan hereunder by 1:00 p.m., Salt Lake City, Utah, time, on the proposed date of such Loan. Each Loan shall be in a maximum amount of $20,000 and in an integral multiple of $1,000. The total of all Loans originated in any seven-day period shall not exceed $20,000. 4 2.3 Conditions to Each Loan ----------------------- Notwithstanding any other provision of this Loan Agreement, no Loan shall be required to be made hereunder if the conditions precedent to the making of such Loan specified in Section 5 have not been satisfied. 2.4 Note ---- The Loans shall be evidenced by a Note (as amended or otherwise modified from time to time, and together with any substitutions therefor or renewals thereof, the "Note") substantially in the form of Exhibit A, with appropriate insertions, dated the date of the initial Loan (or such earlier date as shall be satisfactory to Lender), payable to the order of Lender on the Termination Date in the principal amount of the original Commitment of Lender or, if less, the aggregate unpaid principal amount of all Loans. The date and amount of each Loan made by Lender and of each repayment of principal thereon received by Lender shall be recorded by Lender in its records. The aggregate unpaid principal amount so recorded shall be rebuttably presumptive evidence of the principal amount owing and unpaid on the Note. The failure so to record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of Borrower hereunder or under the Note to repay the actual outstanding principal amount of the Loans together with all interest accruing thereon. 2.5 Due Date -------- The Note shall provide for the payment of no interest except following a default or Event of Default. If any payment of principal under the Note (or of any other amount payable hereunder) falls due on a day that is not a Business Day, then such due date shall be the next preceding Business Day. 2.6 Prepayments ----------- a. Mandatory Prepayment. Borrower agrees that if at any time the aggregate outstanding principal amount of all Loans shall exceed $200,000.00 Borrower shall make a prepayment of the Loans in an amount equal to such excess. b. Optional Prepayments. Borrower may from time to time prepay the Note in whole or in part without premium or penalty. c. Additional Mandatory Prepayment. If Borrower is not in compliance with the financial covenant contained in Section 7.6, then Borrower shall prepay the Loan by an amount equal to 100% of the amounts payable to Borrower under the Exclusive Services Agreement until the covenant has been complied with. Borrower authorizes Lender to make such payments under the Exclusive Services Agreement directly to Lender to the extent of the mandatory prepayment. 5 3. Security for Obligations ------------------------ The Obligations shall be secured by such collateral as is provided in the Security Documents (the "Collateral"), which shall include, without limitation, security interests in all accounts receivable, general intangibles, commissions owed to Borrower under the Exclusive Services Agreement and assets of Borrower. 4. Fraud Guarantee --------------- Upon execution and delivery of this Loan Agreement, Fraud Guarantor shall execute and deliver the Fraud Guarantee in the form of Exhibit B. 5. Effectiveness; Conditions to Loan Disbursements ----------------------------------------------- The obligation of Lender to make the Loans is subject to the following conditions precedent: 5.1 Initial Loan ------------ The obligation of Lender to make the initial Loan is subject to (i) the conditions specified in this Section 5 having been satisfied; and (ii) Lender having received all of the following, each duly executed and dated the Effective Date (or such earlier date shall be satisfactory to Lender), in form and substance satisfactory to Lender. a. The Note. b. A resolution of the Board of Directors of Borrower authorizing the Loans. c. The Security Documents executed by Borrower. d. The Fraud Guarantee executed by the Fraud Guarantor. e. Terminations of all security interests covering the Collateral, including without limitation, such UCC-3 termination statements as Lender may request. f. A Compliance Certificate demonstrating Borrower's compliance with all terms, conditions, and covenants contained in this Loan Agreement. g. Such other documents as Lender may reasonably request. All conditions precedent set forth in this Loan Agreement and any of the Loan Documents are for the sole benefit of Lender and may be waived unilaterally by Lender. 5.2 All Loans --------- 6 The obligation of Lender to make each Loan is subject to the following further conditions precedent that (a) no Event of Default or Unmatured Event of Default has occurred and is continuing or will result from the making of such Loan, (b) the warranties of Fraud Guarantor and Borrower contained in the Loan Documents are true and correct as of the date of such requested Loan, with the same effect as though made on the date of such Loan (and each request by Borrower for a Loan shall be deemed to be a certification by Borrower to Lender that the conditions precedent set forth in this Section 5.2 have been satisfied) (c) the Loan will not cause Borrower to be out of compliance with the financial covenant contained in Section 7.6, and (d) CirTran has approved the making of the Loan by Lender, which approval shall not be unreasonably withheld. 6. Representations and Warranties ------------------------------ 6.1 Organization and Qualification ------------------------------ Borrower represents and warrants that it is a corporation duly organized and existing in good standing under the laws of the State of California. Borrower represents and warrants that it is duly qualified to do business in each jurisdiction where the conduct of its business requires qualification. Borrower represents and warrants that it has the full power and authority to own its property and to conduct the business in which it engages and to enter into and perform its obligations under the Loan Documents. Borrower represents and warrants that it has delivered to Lender or Lender's counsel accurate and complete copies of Borrower's Organizational Documents which are operative and in effect as of the Effective Date. 6.2 Authorization ------------- Borrower represents and warrants that the execution, delivery, and performance by Borrower of the Loan Documents has been duly authorized by all necessary action on the part of Borrower and are not inconsistent with Borrower's Organizational Documents or any board of directors resolution, and that Borrower does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, or other instrument to which Borrower is a party or by which it is bound, and that upon execution and delivery thereof, the Loan Documents will constitute legal, valid, and binding agreements and obligations of Borrower, enforceable in accordance with their respective terms. 6.3 No Liens -------- Borrower represents and warrants that it owns its assets free and clear of any and all liens, pledges or encumbrances of any kind 7 6.4 No Governmental Approval Necessary ---------------------------------- Borrower represents and warrants that no consent by, approval of, giving of notice to, registration with, or taking of any other action with respect to or by any federal, state, or local governmental authority or organization is required for Borrower's execution, delivery, or performance of the Loan Documents. 6.5 Accuracy of Financial Statements -------------------------------- Borrower represents and warrants that all of its financial statements heretofore delivered to Lender fully and fairly represent Borrower's financial condition as of the date thereof and the results of Borrower's operations for the period or periods covered thereby. Borrower represents and warrants that since the dates of its most recent financial statements delivered to Lender, there has been no material adverse change in its financial condition. 6.6 No Pending or Threatened Litigation ----------------------------------- Borrower represents and warrants that there are no actions, suits, or proceedings pending or, to Borrower's knowledge, threatened against or affecting Borrower in any court or before any governmental commission, board, or authority which, if adversely determined, would have a Material Adverse Effect. 6.7 Full and Accurate Disclosure ---------------------------- Borrower represents and warrants that this Loan Agreement, the financial statements referred to herein, and all other statements furnished by Borrower to Lender in connection herewith contain no untrue statement of a material fact and omit no material fact necessary to make the statements contained therein or herein not misleading. Borrower represents and warrants that it has not failed to disclose in writing to Lender any fact that would, or could reasonably have, a Material Adverse Effect. 6.8 Compliance with All Applicable Law ---------------------------------- Borrower represents and warrants that it has complied with all applicable statutes, rules, regulations, orders, and restrictions of any domestic or foreign government, or any instrumentality or agency thereof having jurisdiction over the conduct of Borrower's business or the ownership of its properties, which may have a material impact or effect upon the conduct of Borrower's business or the ownership of its properties. 6.9 Operation of Business --------------------- Borrower represents and warrants that Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights 8 thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted, and Borrower is not in violation of any valid rights of others with respect to any of the foregoing. 6.10 Payment of Taxes ---------------- Borrower represents and warrants that Borrower has filed all tax returns (federal, state, and local) required to be filed and has paid all taxes, assessments, and governmental charges and levies, including interest and penalties, on Borrower's assets, business and income, except such as are being contested in good faith by proper proceedings and as to which adequate reserves are maintained. 6.11 Subsidiaries ------------ Borrower has no Subsidiaries. 7. Borrower's Covenants -------------------- Borrower makes the following agreements and covenants, which shall continue so long as this Loan Agreement is in effect and so long as Borrower is indebted to Lender for the Obligations, unless otherwise agreed in writing by Lender and Borrower. 7.1 Use of Proceeds --------------- Borrower shall use the proceeds of the Loans solely for working capital, capital expenditures, and other general business purposes. Without Lender's consent, Borrower shall not use proceeds to make any investments in securities, to make any loans to third parties or to increase cash or cash reserves to beyond what is required for immediate working capital purposes. 7.2 Continued Compliance with Applicable Law ---------------------------------------- Borrower shall conduct its business in a lawful manner and in material compliance with all applicable federal, state, and local laws, ordinances, rules, regulations, and orders; shall maintain in good standing all licenses and organizational or other qualifications reasonably necessary to its business and existence; and shall not engage in any business not authorized by and not in accordance with its Organizational Documents and other governing documents. 7.3 Prior Consent for Amendment or Change ------------------------------------- Borrower shall not materially modify, amend, or otherwise alter its Organizational Documents or other governing documents without Lender's prior written consent. Borrower shall not, without Lender's prior written consent, waive or fail to enforce its Organizational Documents or other governing documents if doing so would cause a Material Adverse Effect. Borrower shall not change its name or convert to a different form of legal entity without Lender's prior written consent. 9 7.4 Payment of Taxes and Obligations -------------------------------- Borrower shall pay when due all taxes, assessments, and governmental charges and levies on Borrower's assets, business, and income, and all material obligations of Borrower of whatever nature, except such as are being contested in good faith by proper proceedings and as to which adequate reserves are maintained. 7.5 Financial Statements, Reports and Tax Returns --------------------------------------------- Borrower shall provide Lender with such financial statements and reports as Lender may reasonably request. Financial statements and reports shall be prepared in accordance with generally accepted accounting principles and shall fully and fairly represent Borrower's financial condition as of the date thereof and the results of Borrower's operations for the period or periods covered thereby. Until requested otherwise by Lender, Borrower shall provide the following financial statements, reports and tax returns to Lender: a. Monthly financial statements in a form acceptable to Lender, to be delivered to Lender within 15 days of the end of the month. The financial statements shall include a certification by the president or chief financial officer of Borrower that the financial statements fully and fairly represent Borrower's financial condition as of the date thereof and the results of operations for the period covered thereby and are consistent with other financial statements previously delivered to Lender. b. Within 45 days of the end of each calendar quarter, a Compliance Certificate in a form acceptable to Lender certifying that Borrower is or is not in compliance with all terms and conditions of this Loan Agreement, including compliance with the financial covenants provided in Section 7.6, or if not in compliance, the nature of the noncompliance and Borrower's intentions with respect thereto. The Compliance Certificate shall include the data and calculations supporting all financial covenants, whether in compliance or not, and shall be signed by the president or chief financial officer of Borrower. d. The federal income tax return of Borrower within 15 days after the filing thereof. 7.6 Financial Covenants ------------------- The total amount outstanding pursuant to this Loan Agreement shall not any time exceed the Service Agreement Receivables. 10 7.7 Limitations on Debt ------------------- Borrower shall not create, incur, assume or allow to exist any Debt, except Debt incurred pursuant to this Loan Agreement, without the prior written consent of Lender. 7.8 Limitations on Loans -------------------- Borrower shall not make or allow to exist any loans or advances, of any nature whatsoever, to any Person, or guarantee or allow to exist any guarantee of the indebtedness of any Person, except advances in the ordinary course of business to vendors, suppliers, and contractors, without the prior written consent of Lender. 7.9 Limitations on Operating Leases ------------------------------- Borrower shall not create, incur, assume or allow to exist any operating lease obligations without the prior written consent of Lender. 7.10 Restricted Payments ------------------- Borrower shall make no Restricted Payments without the Lender's prior written consent (which may be withheld at the sole discretion of Lender). With regard to such Restricted Payments, Borrower shall not directly or indirectly declare, order, pay or make any Restricted Payment, or set aside any sum or property therefor, without the Lender's prior written consent (which may be withheld at the sole discretion of Lender). 7.11 Liens ----- Without the prior written consent of Lender, Borrower shall not create or permit to exist any Lien on any of its real or personal properties, assets, accounts receivable or rights of whatsoever nature (whether now owned or hereafter acquired), except (a) Liens created pursuant to this Loan Agreement; (b) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves; (c) Liens arising in the ordinary course of business (such as Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law for sums not overdue or being contested in good faith by appropriate proceedings and not involving any deposits or advances for borrowed money or the deferred purchase price of property or services, and, in each case, for which it maintains adequate reserves; and (d) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of Borrower. 11 7.12 Investments ----------- Borrower shall not make or suffer to exist any investments or commitments therefor, without Lender's prior written consent, except short term obligations of, or fully guaranteed by, the United States of America, commercial paper rated A-1 or better by Standard Poor's Rating Services or P-1 or better by Moody's Investor Services, demand deposit accounts maintained in the ordinary course of business, and certificates of deposit issued by and time deposits with domestic commercial banks having capital and surplus in excess of $100,000,000.00. 7.13 Mergers, Consolidations, Sales ------------------------------ Without Lender's prior written consent, Borrower shall not be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or sell, transfer, convey or lease all or any substantial part of its assets, or sell or assign with or without recourse any receivables. 7.14 Subsidiaries ------------ Borrower shall not create any Subsidiary without the prior written consent of Lender. 7.15 Insurance --------- Borrower shall maintain insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof and which shall name Lender as a loss payee. 7.16 Inspection ---------- Borrower shall at any reasonable time and from time to time permit Lender or any representative of Lender to examine and make copies of and abstracts from the records and books of account of, and visit and inspect the properties and assets of, Borrower, and to discuss the affairs, finances, and accounts of Borrower with any of Borrower's officers and directors and with Borrower's independent accountants. 7.17 Operation of Business --------------------- Borrower shall maintain all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary or advisable to conduct its business and Borrower shall not violate any valid rights of others with respect to any of the foregoing. Borrower shall continue to engage in a business of the same general type as now conducted. 12 7.18 Maintenance of Records and Properties ------------------------------------- Borrower shall keep adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of Borrower. Borrower shall maintain, keep and preserve all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted. 7.19 Notice of Default, Litigation ----------------------------- Borrower shall promptly notify Lender in writing of all actions, suits or proceedings filed or threatened against or affecting Borrower in any court or before any governmental commission, board, or authority (or any material adverse development which occurs in any such action, suit or proceeding) which, if adversely determined, would have a Material Adverse Effect. Borrower shall promptly notify Lender in writing of the occurrence of an Event of Default or an Unmatured Event of Default. 7.20 Maintenance of Existence, etc. ------------------------------ Borrower shall maintain and preserve (a) its existence and good standing in the jurisdiction of its organization, and (b) its qualification and good standing in each jurisdiction where the nature of its business makes such qualification necessary. 7.21 Further Assurances ------------------ Borrower shall take such actions as Lender may reasonably request from time to time (including, without limitation, the execution and delivery of guarantees, security agreements, pledge agreements, mortgages, financing statements and other documents, the filing or recording of any of the foregoing, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that the obligations of Borrower hereunder and under the other Loan Documents are secured by the Collateral. 8. Default ------- 8.1 Events of Default ----------------- Time is of the essence of this Loan Agreement. The occurrence of any of the following events shall constitute a default under this Loan Agreement and under the Loan Documents and shall be termed an "Event of Default": a. Default in the payment when due of the principal of any Loan or any other amount payable by Borrower or Fraud Guarantor hereunder or under the Loan Documents or any other agreement between Lender and Borrower with respect to the borrowing of money. 13 b. Any representation, warranty, or financial statement made by or on behalf of Borrower or Fraud Guarantor in any of the Loan Documents, or any document contemplated by the Loan Documents, is materially false or materially misleading. c. Any default by Borrower or Fraud Guarantor under the terms of the Exclusive Services Agreement or the Employment Agreement. d. Any default shall occur under the terms applicable to any Debt of Borrower in an aggregate amount (for all Debt so affected) exceeding $10,000.00 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity. e. Default in the payment when due, or in the performance or observance of, any material obligation of, or condition agreed to by, Borrower with respect to any material purchase or lease of goods or services. f. Borrower or Fraud Guarantor (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing. g. (i) Any involuntary Insolvency Proceeding is commenced or filed against Borrower or Fraud Guarantor, or any writ, judgment, warrant of attachment, warrant of execution or similar process is issued or levied against a substantial part of Borrower's or Fraud Guarantor's properties, and such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, warrant of execution or similar process shall not be released, vacated or fully bonded within 30 days after commencement, filing or levy; (ii) Borrower or Fraud Guarantor admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) Borrower or Fraud Guarantor acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor) or other similar Person for itself or a substantial portion of its property or business. h. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against Borrower involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), as to any single or related series of transactions, incidents or conditions, of $50,000.00 or more, and the same shall remain unvacated and unstayed pending appeal for a period of 30 days after the entry thereof. 14 i. Any non-monetary judgment, order or decree is entered against Borrower that has or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. j. Fraud Guarantor fails in any material respect to perform or observe any applicable term, covenant or agreement of the Fraud Guarantee; or the Fraud Guarantee for any reason is partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, with respect to Fraud Guarantor; or Fraud Guarantor, or any other Person by, through or on behalf of Fraud Guarantor, contests in any manner the validity or enforceability of the Fraud Guarantee or denies that Fraud Guarantor has any further liability or obligation thereunder. k. The Security Documents shall cease to be in full force and effect; or Borrower or any Person by, through or on behalf of Borrower shall contest the validity or enforceability of any Security Document. l. A Change of Control occurs. m. Any Material Adverse Effect occurs. n. Failure by Borrower to comply with or to perform any provision of this Loan Agreement or any of the Loan Documents that is not specifically listed above as an Event of Default, with such failure continuing unremedied for a period of 15 days after notice of such failure is given to Borrower by Lender. 8.2 No Waiver of Event of Default ----------------------------- No course of dealing or delay or failure to assert any Event of Default or Unmatured Event of Default shall constitute a waiver of that Event of Default or Unmatured Event of Default or of any prior or subsequent Event of Default or Unmatured Event of Default. 9. Remedies -------- 9.1 Remedies upon Event of Default ------------------------------ If any Event of Default occurs, Lender may do any or all of the following: a. declare the Commitment of Lender to make Loans to be terminated, whereupon such Commitment shall be terminated; b. declare the unpaid principal amount of all outstanding Loans and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, 15 without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by Borrower; and c. exercise all rights and remedies available to it under the Loan Documents or applicable law; provided, however, that upon the occurrence of any Event of Default specified in subsection 8.1 (f) or (g), the obligation of Lender to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of Lender. 9.2 Rights and Remedies Cumulative; No Waiver of Rights --------------------------------------------------- The rights and remedies herein conferred are cumulative and not exclusive of any other rights or remedies and shall be in addition to every other right, power, and remedy that Lender may have, whether specifically granted herein or hereafter existing at law, in equity, or by statute. Any and all such rights and remedies may be exercised from time to time and as often and in such order as Lender may deem expedient. No delay or omission in the exercise or pursuance by Lender of any right, power, or remedy shall impair any such right, power, or remedy or shall be construed to be a waiver thereof. 9.3 Offset ------ In addition to and not in limitation of all other rights and remedies (including other rights of offset) that Lender may have under applicable law, Lender shall, upon the occurrence of any Event of Default, have the right to appropriate and apply to the payment of the Note and all other liabilities of Borrower under the Loan Documents (whether or not then due), in such order of application as Lender may elect, any and all commissions and amounts owed or owing by Lender to Borrower under the terms of the Exclusive Supply Agreement. To secure the payment of the Obligations, Borrower hereby grants to Lender a continuing lien on and security interest in such commissions and amounts owed. 10. General Provisions ------------------ 10.1 Governing Agreement ------------------- In the event of conflict or inconsistency between this Loan Agreement and the other Loan Documents, excluding the Note, the terms, provisions and intent of this Loan Agreement shall govern. 16 10.2 Borrower's Obligations Cumulative --------------------------------- Every obligation, covenant, condition, provision, warranty, agreement, liability, and undertaking of Borrower contained in the Loan Documents shall be deemed cumulative and not in derogation or substitution of any of the other obligations, covenants, conditions, provisions, warranties, agreements, liabilities, or undertakings of Borrower contained herein or therein. 10.3 Payment of Expenses and Attorney's Fees --------------------------------------- Borrower shall pay all reasonable expenses of Lender relating to the negotiation, drafting of documents, documentation of the Loan, and administration and supervision of the Loan including, without limitation, filing fees, and reasonable attorneys fees and legal expenses, whether incurred in making the Loan, in future amendments or modifications to the Loan Documents, or in ongoing administration and supervision of the Loan. Upon occurrence of an Event of Default, Borrower agrees to pay all costs and expenses, including reasonable attorney fees and legal expenses, incurred by Lender in enforcing, or exercising any remedies under, the Loan Documents, and any other rights and remedies. Borrower agrees to pay all expenses, including reasonable attorney fees and legal expenses, incurred by Lender in any Insolvency Proceeding of any type involving Borrower, Fraud Guarantor, the Loan Documents, or the Collateral, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral or relating to any plan of reorganization. 10.4 Right to Perform for Borrower ----------------------------- Lender may, in its sole discretion and without any duty to do so, elect to discharge taxes, tax liens, security interests, or any other encumbrance upon the Collateral or any other property or asset of Borrower, to pay any filing, recording, or other charges payable by Borrower, or to perform any other obligation of Borrower under this Loan Agreement or under the Security Documents. 10.5 Assignability ------------- Borrower may not assign or transfer any of the Loan Documents and any such purported assignment or transfer is void. Lender may assign or transfer any of the Loan Documents. Funding of this Loan may be provided by an affiliate of Lender. 17 10.6 Third Party Beneficiaries ------------------------- The Loan Documents are made for the sole and exclusive benefit of Borrower, Lender and Fraud Guarantor and are not intended to benefit any other third party. No third party may claim any right or benefit or seek to enforce any term or provision of the Loan Documents. 10.7 Governing Law ------------- The Loan Documents shall be governed by and construed in accordance with the internal laws of the State of California, except to the extent that any such document expressly provides otherwise. 10.8 Severability ------------ The illegality or unenforceability of any provision of this Loan Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Loan Agreement or such instrument or agreement. 10.9 Interpretation of Loan Agreement -------------------------------- The article and section headings in this Loan Agreement are inserted for convenience only and shall not be considered part of the Loan Agreement nor be used in its interpretation. All references in this Loan Agreement to the singular shall be deemed to include the plural when the context so requires, and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation. 10.10 Survival and Binding Effect of Representations, Warranties, ----------------------------------------------------------- and Covenants ------------- All agreements, representations, warranties, and covenants made herein by Borrower shall survive the execution and delivery of this Loan Agreement and shall continue in effect so long as any obligation to Lender contemplated by this Loan Agreement is outstanding and unpaid, notwithstanding any termination of this Loan Agreement. All agreements, representations, warranties, and covenants made herein by Borrower shall survive any Insolvency Proceeding involving Borrower. All agreements, representations, warranties, and covenants in this Loan Agreement shall bind the party making the same, its successors and, in Lender's case, assigns, and all rights and remedies in this Loan Agreement shall inure to the benefit of and be enforceable by each party for whom made, their respective successors and, in Lender's case, assigns. 18 10.11 Indemnification --------------- Borrower shall indemnify Lender for any and all claims and liabilities, and for damages which may be awarded or incurred by Lender, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses incurred in defending such claims, arising from or related in any manner to the negotiation, execution, or performance by Lender of any of the Loan Documents, but excluding any such claims based upon breach or default by Lender or gross negligence or willful misconduct of Lender. Lender shall have the sole and complete control of the defense of any such claims. Lender is hereby authorized to settle or otherwise compromise any such claims as Lender in good faith determines shall be in its best interests. 10.12 Interest on Expenses and Indemnification, Collateral, Order of -------------------------------------------------------------- Application ----------- All expenses, out-of-pocket costs, attorney's fees and legal expenses, amounts advanced in performance of obligations of Borrower, and indemnification amounts owing by Borrower to Lender under or pursuant to this Loan Agreement, the Note, or any Security Documents shall be due and payable upon demand. If not paid upon demand, all such obligations shall bear interest at the default rate provided in the Note from the date of disbursement until paid to Lender, both before and after judgment. Lender is authorized to disburse funds under the Note for payment of all such obligations. Payment of all such obligations shall be secured by the Collateral and by the Security Documents. All payments and recoveries shall be applied to payment of the foregoing obligations, the Note, and all other amounts owing to Lender by Borrower in such order and priority as determined by Lender. Unless provided otherwise in the Note, payments on the Note shall be applied first to accrued interest, if any, and the remainder, if any, to principal. 10.13 Limitation of Consequential Damages ----------------------------------- Lender and its officers, directors, employees, representatives, agents, and attorneys, shall not be liable to Borrower or Fraud Guarantor for consequential damages arising from or relating to any breach of contract, tort, or other wrong in connection with the negotiation, documentation, administration or collection of the Loans. 10.14 Revival Clause -------------- If the incurring of any debt by Borrower or the payment of any money or transfer of property to Lender by or on behalf of Borrower or Fraud Guarantor should for any reason subsequently be determined to be "voidable" or "avoidable" 19 in whole or in part within the meaning of any state or federal law (collectively "voidable transfers"), including, without limitation, fraudulent conveyances or preferential transfers under the United States Bankruptcy Code or any other federal or state law, and Lender is required to repay or restore any voidable transfers or the amount or any portion thereof, or upon the advice of Lender's counsel is advised to do so, then, as to any such amount or property repaid or restored, including all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of Borrower and Fraud Guarantor, and each of them, shall automatically be revived, reinstated and restored and shall exist as though the voidable transfers had never been made. 10.15 Governing Law; Dispute Resolution --------------------------------- The Loan Documents shall be governed by and construed by the laws of the State of California, disregarding the conflicts of laws provisions thereof. Any claim, dispute or controversy arising out of, or relating the Loan Documents or any related agreements or the making, performance, or interpretation of the rights and obligations explicitly set forth in the Loan Documents shall, upon the election by written notice of either party, be settled on an expedited basis by binding arbitration before a single arbitrator mutually agreeable to the parties, or if no agreement is reached, before a single arbitrator from the American Arbitration Association selected in accordance with its rules then in effect, which arbitration shall be conducted in accordance with such rules, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of controversy. 10.16 Notices ------- All notices or demands by any party to this Loan Agreement shall, except as otherwise provided herein, be in writing and shall be deemed to have been sufficiently given when personally delivered, deposited in the United States mail, by registered or certified mail, or deposited with a reputable overnight mail carrier that provides delivery of such mail to be traced, addressed as follows: Mailing addresses: Lender: Diverse Media Group Corp 1875 Century Park East, Suite 1790 Los Angeles, CA 90067 Attention: Trevor Saliba With a copy to: CirTran Corporation 4125 South 6000 West West Valley City, Utah 84128 Attention: Iehab Hawatmeh 20 Callister Nebeker & McCullough 10 East South Temple, Suite 900 Salt Lake City, Utah 84133 Attention: Paul H. Shaphren Borrower: Diverse Talent Group 1875 Century Park East, Suite 2250 Los Angeles, CA 90067 Attention: Christopher Nassif 10.17 Counterparts ------------ This Loan Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of which taken together shall constitute but one and the same instrument. 10.18 Disclosure of Financial and Other Information --------------------------------------------- Borrower and Fraud Guarantor hereby consent to Lender disclosing to CirTran Corporation any and all information, knowledge, reports, and records, including, without limitation, financial statements, relating in any manner whatsoever to the Loans, Borrower, and Fraud Guarantor. 10.19 Integrated Agreement and Subsequent Amendment --------------------------------------------- The Loan Documents and the Exclusive Services Agreement constitute the entire agreement between Lender, Borrower and Fraud Guarantor, and may not be altered or amended except by written agreement signed by Lender, Borrower, and, if applicable, Fraud Guarantor. The Loan Documents and the Exclusive Services Agreement are a final expression of the agreement between Lender, Borrower and Fraud Guarantor and the Loan Documents may not be contradicted by evidence of any alleged oral agreement. All prior and contemporaneous agreements, arrangements and understandings between the parties hereto as to the subject matter hereof are, except as otherwise expressly provided herein, rescinded. 21 IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed and delivered by their proper and duly authorized representatives as of May 24, 2006. Lender: DIVERSE MEDIA GROUP CORP. By: /s/ --------------------------------------- Name: Title: Borrower: DIVERSE TALENT GROUP, INC. By: /s/ ---------------------------------------- Name: Title: 22 EXHIBIT A NOTE 1 EXHIBIT B FRAUDULENT TRANSACTION GUARANTEE 1 - -------------------------------------------------------------------------------- EX-10.4 5 cirtran8k052606ex10-4.txt EXHIBIT 10.4 ================================================================================ Promissory Note (Revolving Loan) May 24, 2006 Borrower: DIVERSE TALENT GROUP, INC. Lender: DIVERSE MEDIA GROUP CORP. Amount: $200,000.00 Maturity: April 30, 2011 For value received, Borrower promises to pay to the order of Lender, in accordance with that certain Loan Agreement dated the same date as this Promissory Note, the sum of Two Hundred Thousand Dollars ($200,000.00) or such other principal balance as may be outstanding hereunder in lawful money of the United States with interest thereon calculated and payable as provided herein. Definitions ----------- Terms used in the singular shall have the same meaning when used in the plural and vice versa. Terms not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement (as defined below). As used in this Promissory Note, the term: "Business Day" means any day other than a Saturday, Sunday or legal holiday in the State of California. "Dollars" and the sign "$" mean lawful money of the United States. "Loan Agreement" means the Loan Agreement dated as of May 24, 2006 between Diverse Media Group Corp., as Lender, and Diverse Talent Group, Inc., as Borrower, together with any exhibits, amendments, addenda, and modifications. Revolving Line of Credit ------------------------ This Promissory Note shall be a revolving line of credit under which Borrower may repeatedly draw and repay funds, so long as no default has occurred hereunder or under the Loan Agreement. Principal shall be payable as follows: Principal shall be paid in accordance with the Loan Agreement and any remaining unpaid principal shall be paid in full on April 30, 2011. Prior to a default in the payment of any principal or an Event of Default, this Promissory Note shall bear no interest and interest shall not accrue on the principal amount of this Promissory Note. General ------- This Promissory Note is made in accordance with the Loan Agreement and is secured by the collateral identified in and contemplated by the Loan Agreement. All disbursements under this Promissory Note shall be made in accordance with the Loan Agreement. If default occurs in the payment of any principal when due, or if any Event of Default occurs, time being the essence hereof, all outstanding principal shall bear interest at a default rate from the date when due until paid, both before and after judgment, which default rate shall be an annual rate equal to the greater of (i) 12% per annum or (ii) 4% per annum above the prime rate of interest as described in the Western Edition of the Wall Street Journal, as such rate shall change from time to time. In such event, the entire unpaid balance shall, at the election of the holder hereof and without notice of such election, become immediately due and payable in full. If this Promissory Note becomes in default or payment is accelerated, Borrower agrees to pay to the holder hereof all collection costs, including reasonable attorney fees and legal expenses, in addition to all other sums due hereunder. This Promissory Note shall be governed by and construed in accordance with the laws of the State of California. Borrower and all endorsers, sureties and guarantors hereof hereby jointly and severally waive presentment for payment, demand, protest, notice of protest, notice of protest and of non-payment and of dishonor, and consent to extensions of time, renewal, waivers or modifications without notice and further consent to the release of any collateral or any part thereof with or without substitution. Borrower: DIVERSE TALENT GROUP, INC., a California corporation By: /s/ -------------------------------- Name: Title: 2 - -------------------------------------------------------------------------------- EX-10.5 6 cirtran8k052606ex10-5.txt EXHIBIT 10.5 ================================================================================ SECURITY AGREEMENT This Security Agreement (the "Security Agreement") is made between Diverse Talent Group, Inc., a California corporation ("Borrower"), and Diverse Media Group Corp. ("Secured Party"), pursuant to a Loan Agreement dated May 24, 2006 between Secured Party and Borrower (the "Loan Agreement"). For good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Secured Party hereby agree as follows: 1. Definitions. Except as otherwise provided herein, terms defined in the Loan Agreement shall have the same meanings when used herein. Terms defined in the singular shall have the same meaning when used in the plural and vice versa. Terms defined in the Uniform Commercial Code as adopted now or in the future in the State of California that are used herein shall have the meanings set forth in the California Uniform Commercial Code, except as expressly defined otherwise. However, if a term is defined in Article 9 of the Uniform Commercial Code of the State of California differently than in another Article of the Uniform Commercial Code of the State of California, the term has the meaning specified in Article 9. As used herein, the term: "Assignment and Exclusive Services Agreement" means the Assignment and Exclusive Services Agreement, effective April 1, 2006, between the Lender, the Borrower and Christopher Nassif. "Collateral" means the collateral described in Section 2 below. "Default Rate" means the default interest rate provided in the Note. "Liquidation Costs" means the reasonable costs and out of pocket expenses incurred by Secured Party in obtaining possession of any Collateral, in storage and preparation for sale, lease or other disposition of any Collateral, in the sale, lease, or other disposition of any or all of the Collateral, or otherwise incurred in foreclosing on any of the Collateral, including, without limitation, (a) reasonable attorneys' fees and legal expenses, (b) transportation and storage costs, (c) advertising costs, (d) sale commissions, (e) sales tax and license fees, (f) costs for improving or repairing any of the Collateral, and (g) costs for preservation and protection of any of the Collateral. "Note" means the Promissory Note of Purchaser in favor of Secured Party dated May 24, 2006 (the "Note"), in the original principal amount of $200,000.00. 2. Grant of Security Interest. Borrower hereby grants to Secured Party a security interest in all personal property of Borrower, wherever located, now owned or hereafter acquired or created, including, without limitation, the following (the "Collateral"): a. All inventory as defined in the Uniform Commercial Code, it being acknowledged that Borrower does not routinely maintain inventory (collectively, the "Inventory"). b. All accounts as defined in the Uniform Commercial Code, payments and commissions owing to Borrower under the Assignment and Exclusive Services Agreement, accounts receivable, amounts owing to Borrower under any rental agreement or lease, any rights to payment customarily or for accounting purposes classified as accounts receivable, and all rights to payment, proceeds or distributions under any contract, of Borrower, presently existing or hereafter created, and all proceeds thereof (collectively, the "Accounts"). c. All equipment and goods as defined in the Uniform Commercial Code, all motor vehicles, wherever located, and all related right, title and interest, of Borrower, now owned or hereafter acquired or created, all proceeds and products of the foregoing and all additions and accessions to, replacements of, insurance proceeds of, and documents covering any of the foregoing, all leases of any of the foregoing, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of any of the foregoing or any interest therein (collectively, the "Equipment"). d. All general intangibles as defined in the Uniform Commercial Code, choses in action, proceeds, contracts, distributions, dividends, refunds, security deposits, judgments, insurance claims, any right to payment of any nature, intellectual property rights or licenses, payment intangibles, licenses, tax refunds, any other rights or assets of Borrower customarily or for accounting purposes classified as general intangibles, and all documentation and supporting information related to any of the foregoing, all rents, profits and issues thereof, and all proceeds thereof. e. All of the following (collectively, "Financial Obligations Collateral"): i. Any and all promissory notes and instruments payable to or owing to Borrower or held by Borrower, whether now existing or hereafter created (collectively, the "Promissory Notes"); ii. Any and all leases under which Borrower is the lessor, whether now existing or hereafter created (collectively, the "Leases"); iii. Any and all chattel paper (as defined in the Uniform Commercial Code) (whether tangible or electronic) in favor of, owing to, or held by Borrower, including, without limitation, any and all conditional sale contracts or other sales agreements, whether Borrower is the original party or the assignee, whether now existing or hereafter created (collectively, the "Chattel Paper"); 2 iv. Any and all security agreements, collateral and titles to motor vehicles that secure any of the foregoing obligations, whether now existing or hereafter created (collectively, the "Security Agreements Collateral"); and v. All amendments, modifications, renewals, extensions, replacements, additions, and accessions to the foregoing and all proceeds thereof. f. All deposit accounts (as defined in the Uniform Commercial Code), including without limitation, all deposit accounts, checking accounts, savings accounts, money market accounts, certificates of deposit, depositary accounts, balances, reserves, deposits, debts or any other amounts or obligations of Secured Party owing to Borrower, including, without limitation, all interest, dividends or distributions accrued or to accrue thereon, whether or not due, now existing or hereafter arising or created, and all proceeds thereof. g. All investment property (as defined in the Uniform Commercial Code), all interest, dividends or distributions accrued or to accrue thereon, whether or not due, now existing or hereafter arising or created, and all proceeds thereof. h. All documents (as defined in the Uniform Commercial Code), all amendments, modifications, renewals, extensions, replacements, additions, and accessions thereto, and all proceeds thereof. i. All letter of credit rights (as defined in the Uniform Commercial Code) (whether or not the letter of credit is evidenced by a writing), all amendments, modifications, renewals, extensions, replacements, additions, and accessions thereto, and all proceeds thereof. j. All supporting obligations (as defined in the Uniform Commercial Code), all amendments, modifications, renewals, extensions, replacements, additions, and accessions thereto, and all proceeds thereof. k. All of the following (collectively, "Intellectual Property"): i. All right, title and interest of Borrower in and to patent applications and patents, including, without limitation, all proceeds thereof (such as, by way of example, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, all rights corresponding thereto throughout the world, and all reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof (collectively, the "Patents"); ii. All right, title and interest of Borrower in and to trademark applications and trademarks, including, without limitation, all renewals thereof, all proceeds thereof (such as, by way of example, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, and all rights corresponding thereto throughout the world (collectively, the "Trademarks"), and the goodwill of the business to which each of the Trademarks relates; 3 iii. All copyrights of Borrower and all rights and interests of every kind of Borrower in copyrights and works protectible by copyright, whether now owned or hereafter acquired or created, and all renewals and extensions thereof, and in and to the copyrights and rights and interests of every kind or nature in and to all works based upon, incorporated in, derived from, incorporating or relating to any of the foregoing or from which any of the foregoing is derived, and all proceeds thereof (such as, by way of example, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, and all rights corresponding thereto throughout the world (collectively, the "Copyrights"); iv. All of Borrower's trade secrets and other proprietary information, now existing or created in the future, and all proceeds thereof, including, but not limited to formulas, recipes, know-how, techniques, processes, ideas, product information, marketing methods, methods of doing business, financial information and customer lists (collectively, the "Trade Secrets"); v. All right, title, and interest of Borrower in, to and under license agreements and contracts concerning Patents, Trademarks, Copyrights, and Trade Secrets now existing or created in the future, all amendments, modifications, and replacements thereof, all royalties and other amounts owing thereunder, and all proceeds thereof (collectively, the "Licenses"); and vi. All internet domain names and addresses of Borrower now existing or created in the future, and all proceeds thereof. Borrower and Secured Party acknowledge their mutual intent that all security interests contemplated herein are given as a contemporaneous exchange for new value to Borrower, regardless of when advances to Borrower are actually made or when the Collateral is acquired. 3. Debts Secured. The security interest granted by this Security Agreement shall secure all of Borrower's present and future debts, obligations, and liabilities of whatever nature to Secured Party under or with respect to the Loan Documents, and all renewals, extensions, modifications and replacements thereof. 4. Authorization to File Financing Statements. Borrower hereby irrevocably authorizes Secured Party at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State of California, or such other jurisdiction, for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Borrower is an organization, the type of organization and any organizational identification number issued to Borrower and, (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. Borrower agrees to furnish any 4 such information to Secured Party promptly upon Secured Party's request. Borrower also ratifies its authorization for Secured Party to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof. 5. Location of Borrower. Borrower agrees that it will not change its state of incorporation without giving Secured Party at least thirty (30) days prior written notice thereof. 6. Representations and Warranties Concerning Collateral. Borrower represents and warrants that: a. Borrower is the sole owner of the Collateral. b. The Collateral is not subject to any security interest, lien, prior assignment, or other encumbrance of any nature whatsoever that has not been consented to by Secured Party. c. The Accounts are each a bona fide obligation of the obligor identified therein for the amount identified in the records of Borrower, except for normal and customary disputes that arise in the ordinary course of business and that do not affect a material portion of the Accounts. d. To the best knowledge of Borrower, there are no defenses or setoffs to payment of the Accounts that can be asserted by way of defense or counterclaim against Borrower or Secured Party, except for normal and customary disputes that arise in the ordinary course of business and that do not affect a material portion of the Accounts. e. There is presently no default or delinquency in any payment of the Accounts, except for any default or delinquency with respect to Accounts that has been reserved against by Borrower in accordance with generally accepted accounting principles and, except for normal and customary disputes that arise in the ordinary course of business and that do not affect a material portion of the Accounts. f. Borrower has no knowledge of any fact or circumstance that would materially impair the ability of any obligor on the Accounts to timely perform its obligations thereunder, except those that arise in the ordinary course of business and that do not affect a material portion of the Accounts. g. Any services performed or goods sold giving rise to the Accounts have been rendered or sold in compliance with applicable laws, ordinances, rules, and regulations and in the ordinary course of Borrower's business. h. There have been no extensions, modifications, or other agreements relating to payment of the Accounts, except those granted in the ordinary course of business and that do not affect a material portion of the Accounts. 5 i. The Promissory Notes, Leases, Chattel Paper, and Security Agreements Collateral are bona fide obligations of the obligors identified therein for the amount identified therein or as otherwise disclosed in writing to Secured Party by Borrower, except for normal and customary disputes that arise in the ordinary course of business and that do not affect a material portion of such obligations. 7. Covenants Concerning Collateral. Borrower covenants that: a. Borrower will keep the Collateral free and clear of any and all security interests, liens, assignments or other encumbrances. b. Borrower agrees to execute and deliver any applications for certificates of title, certificates of title, and other documents (properly endorsed, if necessary) reasonably requested by Secured Party for perfection or enforcement of any security interest or lien, and to give good faith, diligent cooperation to Secured Party, and to perform such other acts reasonably requested by Secured Party for perfection and enforcement of any security interest or lien created hereunder, including, without limitation, obtaining control for purposes of perfection with respect to Collateral consisting of deposit accounts, investment property, letter-of-credit rights, and electronic chattel paper. Secured Party is authorized to file, record, or otherwise utilize such documents as it deems necessary to perfect or enforce any security interest or lien granted hereunder. c. Borrower shall keep the Equipment in good repair, ordinary wear and tear and obsolescence excepted. Borrower shall pay when due all taxes, license fees and other charges on the Equipment. Borrower shall not sell, misuse, conceal, or in any way dispose of the Equipment or permit it to be used unlawfully or for hire or contrary to the provisions of any insurance coverage. Risk of loss of the Equipment shall be on Borrower at all times unless Secured Party takes possession of the Equipment. Loss of or damage to the Equipment or any part thereof shall not release Borrower from any of the obligations secured by the Equipment. Secured Party or its representatives may, at any time and from time to time upon reasonable notice to Borrower, enter any premises owned or leased by Borrower where the Equipment is located and inspect, audit and check the Equipment. d. Borrower agrees to insure the Equipment, at Borrower's expense, against loss, damage, theft, and such other risks as Secured Party may reasonably request to the full insurable value thereof with insurance companies and policies reasonably satisfactory to Secured Party. Proceeds from such insurance shall be payable to Secured Party as its interest may appear and such policies shall provide for a minimum ten days written cancellation notice to Secured Party. Upon request, policies or certificates attesting to such coverage shall be delivered to Secured Party. Insurance proceeds may be applied by Secured Party toward payment of any obligation secured by this Security Agreement, whether or not due, in such order of application as Secured Party may elect. e. So long as Borrower is not in default hereunder or under any obligation secured hereby, Borrower shall have the right to sell or otherwise dispose of the Inventory in the ordinary course of business. No other 6 disposition of the Inventory may be made without the prior written consent of Secured Party. f. If Borrower is in default hereunder or if Lender deems itself insecure, Borrower agrees that Secured Party shall have the right to appropriate and apply to the payment of all liabilities of Borrower to the Secured Party any and all commissions and amounts owed or owing by Secured Party to Borrower under the terms of the Assignment and Exclusive Services Agreement. g. All proceeds from the sale or other disposition of the Inventory and Accounts and all collections and other proceeds therefrom shall, at Secured Party's request, be deposited into an account designated by Secured Party (the "Cash Collateral Account"), which account shall be under the sole and exclusive control of Secured Party. Such proceeds and collections shall not be commingled with any other funds and shall be promptly and directly deposited into such account in the form in which received by Borrower. Such proceeds and collections shall not be deposited in any other account and such Cash Collateral Account shall contain no funds other than such proceeds and collections. All or any portion of the funds on deposit in such Cash Collateral Account may, in the sole discretion of Secured Party, be applied from time to time as Secured Party elects to payment of obligations secured by this Security Agreement or Secured Party may elect to turn over to Borrower, from time to time, all or any portion of said funds. h. Borrower agrees to use diligent and good faith efforts to collect the Accounts and Financial Obligations Collateral. Borrower is authorized to collect the Accounts and Financial Obligations Collateral in a commercially reasonable manner. Secured Party, in its sole discretion, may terminate such authority whereupon Secured Party is authorized by Borrower, without further act, to notify any and all account debtors or other obligors on such Collateral to make payment thereon directly to Secured Party, and to take possession of all proceeds from the Accounts and any such payments, and to take any action that Borrower might or could take to collect the Accounts and the Financial Obligations Collateral, including the right to make any compromise, discharge, or extension of the Accounts or such Collateral. Upon request of Secured Party, Borrower agrees to execute and deliver to Secured Party a notice to Borrower's account debtors or obligors instructing said account debtors or obligors to pay Secured Party. Borrower further agrees to execute and deliver to Secured Party all other notices and similar documents reasonably requested by Secured Party to facilitate collection of the Accounts and such Collateral. i. All costs of collection of the Accounts and Financial Obligations Collateral, including attorneys' fees and legal expenses, shall be borne solely by Borrower, whether such costs are incurred by or for Borrower or Secured Party. In the event Secured Party elects to undertake direct collection of the Accounts or Financial Obligations Collateral, Borrower agrees to deliver to Secured Party, if so requested, all books, records, and documents in Borrower's possession or under its control as may relate to the Accounts or Financial Obligations Collateral or as may be helpful to facilitate such collection. Secured Party shall have no obligation to cause an attorney demand letter to be sent, to file any lawsuit, or to take any other legal action in 7 collection thereof. It is agreed that collection of the Accounts and Financial Obligations Collateral in a commercially reasonable manner does not require that any such legal action be taken. j. Borrower does hereby make, constitute, and appoint Secured Party and its designees as Borrower's true and lawful attorney in fact, with full power of substitution, such power to be exercised in the following manner: (1) Secured Party may receive and open all mail addressed to Borrower and remove therefrom any cash, notes, checks, acceptances, drafts, money orders or other instruments in payment of the Accounts; (2) Secured Party may cause mail relating to the Accounts or Financial Obligations Collateral to be delivered to a designated address of Secured Party where Secured Party may open all such mail and remove therefrom any cash, notes, checks, acceptances, drafts, money orders, or other instruments in payment of the Accounts or Financial Obligations Collateral; (3) Secured Party may endorse Borrower's name upon such notes, checks, acceptances, drafts, money orders, or other forms of payment; (4) Secured Party may settle or adjust disputes or claims in respect to the Accounts for amounts and upon such terms as Secured Party, in its sole discretion and in good faith, deems to be advisable, in such case crediting Borrower with only the proceeds received and collected by Secured Party after deduction of Secured Party's costs, including reasonable attorneys' fees and legal expenses; and (5) Secured Party may do any and all other things necessary or proper to carry out the intent of this Security Agreement and to perfect and protect the liens and rights of Secured Party created under this Security Agreement. k. Immediately upon execution of this Security Agreement, Borrower shall deliver to Secured Party all Promissory Notes and Chattel Paper. Upon creation of any Promissory Notes or Chattel Paper in the future, immediately upon creation Borrower shall deliver the Promissory Notes and Chattel Paper to Secured Party. l. Borrower shall not, without Secured Party's written consent, make any material settlement, compromise or adjustment of any item of Financial Obligations Collateral or grant any material discounts, extensions, allowances or credits thereon. m. Borrower will at all times keep accurate and complete records as to the Financial Obligations Collateral and payments thereon and will allow Secured Party or its representatives, at any time and from time to time upon reasonable notice to Borrower, to inspect, audit, check, copy and otherwise review those records. 8. Right to Perform for Borrower. Secured Party may, in its sole discretion and without any duty to do so, elect to discharge taxes, tax liens, security interests, or any other encumbrance upon the Collateral, perform any duty or obligation of Borrower, pay filing, recording, insurance and other charges payable by Borrower, or provide insurance as provided herein if Borrower fails to do so. Any such payments advanced by Secured Party shall be repaid by Borrower upon demand, together with interest thereon from the date of the advance until repaid, both before and after judgment, at the Default Rate. 8 9. Default. Time is of the essence of this Security Agreement. The occurrence of any of the following events shall constitute a default under this Security Agreement: a. Any representation or warranty made by Borrower in this Security Agreement is materially false or materially misleading when made; b. Borrower fails in the payment or performance of any obligation, covenant, agreement or liability created by or arising from or related to this Security Agreement. c. Borrower fails in the payment or performance of any obligation, covenant, agreement or liability created by or arising from or related to the Note or the Loan Agreement. No course of dealing or any delay or failure to assert any default shall constitute a waiver of that default or of any prior or subsequent default. 10. Remedies. Upon the occurrence of any default under this Security Agreement, Secured Party shall have the following rights and remedies, in addition to all other rights and remedies existing at law, in equity, or by statute. a. Secured Party shall have all the rights and remedies available under the Uniform Commercial Code; b. Secured Party shall have the right to enter upon any premises leased or owned by Borrower where the Collateral or records relating thereto may be and take possession of the Collateral and such records; c. Upon request of Secured Party, Borrower shall, at the expense of Borrower, assemble the Collateral and records relating thereto at a place designated by Secured Party and tender the Collateral and such records to Secured Party; d. Without notice to Borrower, Secured Party may obtain the appointment of a receiver of the business, property and assets of Borrower and Borrower hereby consents to the appointment of Secured Party or such person as Secured Party may designate as such receiver; and e. Secured Party may sell, lease or otherwise dispose of any or all of the Collateral and, after deducting the Liquidation Costs, apply the remainder to pay, or to hold as a reserve against, the obligations secured by this Security Agreement. Borrower shall be liable for all deficiencies owing on any obligations secured by this Security Agreement after liquidation of the Collateral. Secured Party shall not have any obligation to clean-up or otherwise prepare any Collateral for sale, lease, or other disposition. The rights and remedies herein conferred are cumulative and not exclusive of any other rights and remedies and shall be in addition to every other right, power and remedy herein specifically granted or hereafter existing 9 at law, in equity, or by statute that Secured Party might otherwise have, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Secured Party may deem expedient. No delay or omission in the exercise of any such right, power or remedy or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver thereof or of any default or to be an acquiescence therein. In the event of breach or default under the terms of this Security Agreement, Borrower agrees to pay all costs and expenses, including reasonable attorneys' fees and legal expenses, incurred by or on behalf of Secured Party in enforcing, or exercising any remedies under, this Security Agreement, and any other rights and remedies. Additionally, Borrower agrees to pay all Liquidation Costs. Any and all such costs, expenses, and Liquidation Costs shall be payable by Borrower upon demand, together with interest thereon from the date of the advance until repaid, both before and after judgment, at the Default Rate. Regardless of any breach or default, Borrower agrees to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by Secured Party in any bankruptcy proceedings of any type involving Borrower, the Collateral, or this Security Agreement, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral, or relating to any plan of reorganization. 11. Notices. All notices or demands by any party hereto shall be in writing and shall be sent as provided in the Loan Agreement. 12. Indemnification. Borrower shall indemnify Secured Party for any and all claims and liabilities, and for damages that may be awarded or incurred by Secured Party, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses incurred in defending such claims, arising from or related in any manner to the negotiation, execution, or performance by Secured Party of this Security Agreement, but excluding any such claims based upon breach or default by Secured Party or gross negligence or willful misconduct of Secured Party. Secured Party shall have the sole and complete control of the defense of any such claims. Secured Party is hereby authorized to settle or otherwise compromise any such claims as Secured Party in good faith determines shall be in its best interests. 13. General. This Security Agreement is made for the sole and exclusive benefit of Borrower and Secured Party and is not intended to benefit any third party. No such third party may claim any right or benefit or seek to enforce any term or provision of this Security Agreement. In recognition of Secured Party's right to have all its attorneys' fees and expenses incurred in connection with this Security Agreement secured by the Collateral, notwithstanding payment in full of the obligations secured by the Collateral, Secured Party shall not be required to release, reconvey, or terminate any security interest in the Collateral unless and until Borrower has 10 executed and delivered to Secured Party general releases in form and substance satisfactory to Secured Party. Secured Party and its officers, directors, employees, representatives, agents and attorneys, shall not be liable to Borrower for consequential damages arising from or relating to any breach of contract, tort, or other wrong in connection with or relating to this Security Agreement or the Collateral. If the incurring of any debt by Borrower or the payment of any money or transfer of property to Secured Party by or on behalf of Borrower should for any reason subsequently be determined to be "voidable" or "avoidable" in whole or in part within the meaning of any state or federal law (collectively "voidable transfers"), including, without limitation, fraudulent conveyances or preferential transfers under the United States Bankruptcy Code or any other federal or state law, and Secured Party is required to repay or restore any voidable transfers or the amount or any portion thereof, or upon the advice of Secured Party's counsel is advised to do so, then, as to any such amount or property repaid or restored, including all reasonable costs, expenses, and attorneys' fees of Secured Party related thereto, the liability of Borrower under this Security Agreement, shall automatically be revived, reinstated and restored and shall exist as though the voidable transfers had never been made. This Security Agreement shall be governed by and construed in accordance with the laws of the State of California. Any provision of this Security Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All references in this Security Agreement to the singular shall be deemed to include the plural if the context so requires and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation. All agreements, representations, warranties and covenants made by Borrower shall survive the execution and delivery of this Security Agreement, the filing and consummation of any bankruptcy proceedings, and shall continue in effect so long as any obligation to Secured Party contemplated by this Security Agreement is outstanding and unpaid, notwithstanding any termination of this Security Agreement. All agreements, representations, warranties and covenants in this Security Agreement shall bind the party making the same and its heirs and successors, and shall be to the benefit of and be enforceable by each party for whom made and their respective heirs, successors and assigns. This Security Agreement, constitutes the entire agreement between Borrower and Secured Party as to the subject matter hereof and may not be altered or amended except by written agreement signed by Borrower and Secured Party. All other prior and contemporaneous agreements, arrangements, and 11 understandings between the parties hereto as to the subject matter hereof are, except as otherwise expressly provided herein, rescinded. Dated as of May 24, 2006 SECURED PARTY: Diverse Media Group Corp., a Utah corporation By: /s/ -------------------------------------- Name: Title: BORROWER: Diverse Talent Group, Inc., a California corporation By: /s/ -------------------------------------- Name: Title: 12 - -------------------------------------------------------------------------------- EX-10.6 7 cirtran8k052606ex10-6.txt EXHIBIT 10.6 ================================================================================ FRAUDULENT TRANSACTION GUARANTEE This Fraudulent Transaction Guarantee (the "Guarantee") is executed in connection with that certain Loan Agreement dated May 24, 2006 (the "Loan Agreement") between Diverse Media Group Corp. ("Lender"), a Utah corporation, and Diverse Talent Group, Inc., a California corporation ("Borrower"), and the undersigned as an inducement to Lender to enter into and perform its obligations thereunder. For good and valuable consideration (including benefit personally derived by the undersigned due to the undersigned's relationship with Borrower) receipt of which is hereby acknowledged, the undersigned ("Guarantor") agrees as follows: 1. Definitions. "Loan Documents" means the Loan Agreement, the Note, the Guarantee, and the Security Documents as defined therein and any other documents executed in connection therewith and all other agreements and documents contemplated by any of the aforesaid documents, and all amendments, modifications, addendums and replacements, whether presently existing or created in the future. Except as otherwise provided herein, terms defined in the Loan Documents shall have the same meanings when used herein. Terms defined in the singular shall have the same meaning when used in the plural and vice versa. 2. Guarantee. Guarantor hereby personally forever indemnifies and holds free and harmless Lender, and its affiliates, officers, managers, shareholders, employees, attorneys, agents and representatives, from and against any damages, losses, costs or expenses Lender may incur due to or arising out of any fraudulent actions of Borrower, its officers, directors, employees or agents, or any fraudulent failure to act of Borrower, its officers, directors, employees or agents, in performing any of Borrower's obligations to Lender under or in connection with the Loan Documents. For purposes of this Guarantee, fraudulent actions or fraudulent failure to act shall include intentional material or negligent misrepresentations, misappropriation or misdirection of funds, or breach of representation, warranty or covenant (other than a breach of covenant to pay money that is caused by Borrower's bona fide inability to pay) resulting in harm, loss, damage, or liability to Lender or its interests under the Loan Documents. 2. Guarantee Unconditional. The liability of Guarantor hereunder is not conditional or contingent upon the genuineness, validity, or enforceability of any of the Loan Documents or the value or sufficiency of any Collateral. 3. Agreement to Pay Attorneys' Fees. Guarantor agrees to pay all collection costs, including reasonable attorneys' fees and legal expenses, incurred by Lender in enforcing this Guarantee. 4. Waiver by Guarantor. Guarantor expressly and absolutely, without affecting the liability of Guarantor hereunder: a. Waives any notice which may be required relative to the acceptance of this Guarantee; b. Waives notice of transactions which have occurred under or relating to or affecting this Guarantee; c. Waives notice of any adverse change in the condition, financial or otherwise, of Borrower or Guarantor, any change concerning any Collateral, or of any other fact that might materially increase Guarantor's risk, whether or not Lender has knowledge of the same; d. Waives any right to require Lender to (i) proceed against Borrower by suit or otherwise, (ii) foreclose, proceed against, liquidate or exhaust any Collateral, or (iii) exercise, pursue or enforce any right or remedy Lender may have against Borrower, any Collateral, any other person or entity, or otherwise, prior to proceeding against Guarantor; and e. Waives any and all rights of subrogation, contribution or indemnification against Borrower or Guarantor of any nature whatsoever, now existing or hereafter arising or created. 5. Consent to Lender's Acts. Guarantor hereby authorizes and consents to Lender at any time and from time to time, without notice or further consent of Guarantor, doing the following and Guarantor agrees that the liability of Guarantor shall not be released or affected by: a. The taking or accepting, or the failure by Lender to take or accept, any other Collateral or guarantee; b. The modification, amendment, extension, renewal, replacement, or termination of any of the Loan Documents; c. Any complete or partial release, substitution, subordination, impairment, loss, compromise, or other modification of any Collateral or any Guarantee; d. The complete or partial release or substitution of Borrower or any Guarantor; e. Any renewal, extension, modification, replacement, acceleration, consolidation, adjustment, indulgence, forbearance, waiver or compromise of the payment of any part or all of Borrower's obligations, or any liability of Guarantor, or the performance of any covenant contained in the Loan Documents; f. Any neglect, delay, omission, failure, or refusal of Lender to take or prosecute any action for enforcement of any provision of any of the Loan Documents or any action in connection with any Collateral or any Guarantee, including, without limitation, the failure of Lender to perfect any security interest in any Collateral; 2 g. Acceptance of any partial or late payments; and h. Lender exercising any and all rights and remedies available to Lender by law, at equity or by agreement, even if the exercise thereof may affect, modify, or eliminate any Guarantor's right of subrogation against Borrower or any other party. 6. Termination of Guarantee. No termination of this Guarantee by Guarantor shall be effective. 7. Cumulative Rights. The rights and remedies herein conferred are cumulative and not exclusive of any other rights or remedies that Lender may have. No delay or omission in the exercise or pursuance by Lender of any right, power, or remedy shall impair any such right, power, or remedy or shall be construed to be a waiver thereof. 8. Governing Law. This Guarantee shall be governed by and construed in accordance with the laws of the State of Utah. 9. Binding Effect. This Guarantee may be executed and delivered to Lender prior to or after the execution and delivery of the Loan Documents. This Guarantee shall nonetheless be binding and enforceable upon its execution and delivery to Lender. 10. Severability and Interpretation. Any provision of this Guarantee that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The headings in this Guarantee are inserted for convenience only and shall not be considered part of the Guarantee nor be used in its interpretation. All references in this Guarantee to the singular shall be deemed to include the plural when the context so requires, and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation. 11. Continuing Agreement. All agreements, representations, warranties, and covenants made herein by Guarantor shall survive the execution and delivery of this Guarantee. All agreements, representations, warranties, and covenants made herein by Guarantor shall survive any bankruptcy proceedings. This Guarantee shall bind the party making the same, and its successors, assigns, heirs, executors, and personal representatives. The death, insolvency, bankruptcy, disability, or lack of corporate power of Borrower, Guarantor, or any other person or entity at any time will not affect this Guarantee. 12. Consent to Utah Jurisdiction and Exclusive Jurisdiction of Utah Courts. Guarantor acknowledges that by execution and delivery of this Guarantee, Guarantor has transacted business in the State of Utah and Guarantor voluntarily submits to, consents to, and waives any defense to the jurisdiction of courts located in the State of Utah as to all matters relating to or arising from this Guarantee. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER, THE STATE 3 AND FEDERAL COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THIS GUARANTEE. 13. Entire Agreement. This Guarantee, together with the Loan Documents, constitutes the entire agreement between Lender and Guarantor concerning the subject matter hereof, and may not be altered or amended except by written agreement signed by Lender and Guarantor. Dated: May 24, 2006 Guarantor: /s/ -------------------------------- Christopher Nassif 4 - -------------------------------------------------------------------------------- EX-99.1 8 cirtran8k052606ex99.txt EXHIBIT 99.1 ================================================================================ For Immediate Release Company Contacts: Press Contact: - ----------------- -------------- Trevor M. Saliba Christopher Nassif David A. Kaminer CirTran / Talent Group The Kaminer Group Diverse Media Group Diverse +(310) 201-6565 +(914) 684-1934 +(310) 492-0400 cnassif@diversetalentgroup.com dkaminer@kamgrp.com trevor@cirtran.com ------------------------------ ------------------- - ------------------ CirTran Signs Exclusive Services Agreement with Diverse Talent Group, Adding `Business and Business Success' to its New Diverse Media Group -- Los Angeles-Based Subsidiaries Target Direct Response and Entertainment Industries SALT LAKE CITY, June 1, 2006 - CirTran Corporation (OTC BB: CIRT) said today that it has closed an agreement to add "business and a record of business success" to its new media/marketing division, Diverse Media Group (DMG), which it formed earlier this year to provide end-to-end services to the direct response and entertainment industries. Trevor M. Saliba, executive vice president of worldwide business development for CirTran and president of its new Diverse Media Group (DMG) subsidiary, said an exclusive services agreement was signed earlier this week with the Diverse Talent Group, Inc. (www.diversetalentgroup.com), a nationally-known talent and literary agency, and its founder and CEO Christopher Nassif. The agreement covers a five-year period that commenced on April 1, when the companies began co-marketing and working together, and includes the assignment of all talent contacts and the first right of refusal on all new and existing business to DMG. The Diverse Talent Group was established by Mr. Nassif following a series of acquisitions and roll-ups by his CNA & Associates, which he founded in 1981. A leading talent agency, it has represented all tiers of entertainment industry figures, including actors, writers, directors, producers and below-the-line-talent. Currently, Diverse Talent represents talent on leading primetime TV shows including Lost, 24, House, Bones, Wildfire, Prison Break, Deadwood, NCIS, Criminal Minds, Seventh Heaven, Charmed, One Tree Hill, and Las Vegas. In addition, such leading daytime shows as The Young and the Restless, General Hospital and Days of Our Lives and such recent feature films and soon to be released features; Dreamgirls, Welcome to America, The Flock and Transformers. Mr. Nassif will continue to head Diverse Talent as it functions as part of DMG, and will also serve as a member to DMG's Board of Directors advising on strategic investments and acquisitions of key talent agents and agencies to grow and expand the Diverse Talent brand. `Hitting the Ground Running' "By working together over the last two months, we are hitting the ground running today," said Mr. Saliba. "And by joining forces with Diverse Talent, we are adding business and a record of business success to this new venture from its outset." Mr. Saliba said that DMG believes it can meet its needs, and the needs of marketing-driven companies in the U.S. and overseas, by pairing talent and products to establish a recognizable and long-standing brand. "This formula has proven successful as Diverse Talent was instrumental in assisting CirTran recently with our new Real Deal Grill endorsed by former four-time heavyweight champion Evander Holyfield, who will serve as its TV infomercial spokesperson and is also represented by Diverse Talent". "Talent and product together can create a powerful brand," he said. "Today's agreement is a giant step for DMG and CirTran in that direction." Mr. Saliba said the roots of the Diverse Talent Group go to 1981, "with the agency growing under the dynamic and imaginative leadership of Christopher Nassif has grown into a professional staff in excess of 20 industry professionals as well as generating approximately $20 million gross revenues in 2005 for its clients with approximately $2,000,000 in commission income to the agency. Diverse Talent has been consistently recognized as one of the best talent and literary agencies since its inception by being named as one of the Top 15 agencies by the Los Angeles Business Journal." He said CirTran's new Diverse organizations - media and talent - will provide an array of services, including product marketing, production, media financial services and product placement, to the entertainment and direct response industries. Both subsidiaries are based at 1875 Century Park East in the Century City Entertainment and Business District of Los Angeles. `Culminating 25-Years of Success' Mr. Nassif said that the joining of his organization with the publicly-held CirTran companies was "the culmination of 25 years of success." "I am personally excited about joining forces with CirTran and its Diverse brand . . . a feeling shared by the staff and management of the agency as well," he said. Mr. Nassif said that future plans for Diverse Talent include the establishment of a full-service music division as well as product merchandise and direct response divisions." About CirTran Corporation - ------------------------- Founded in 1993, CirTran Corporation (OTC BB: CIRT, www.CirTran.com) is a premier international full-service contract manufacturer. Headquartered in Salt Lake City, its ISO 9001:2000-certified, non-captive 40,000-square foot manufacturing facility is the largest in the Intermountain Region, providing "just-in-time" inventory management techniques designed to minimize an OEM's investment in component inventories, personnel and related facilities while reducing costs and ensuring speedy time-to-market. In 1998, CirTran acquired Racore Technology (www.racore.com), founded in 1983 and reorganized as Racore Technology Corporation in 1997. In 2004, it formed CirTran-Asia as a high-volume manufacturing arm and wholly-owned subsidiary with its principal office in ShenZhen, China. CirTran-Asia operates in three primary business segments: high-volume electronics, fitness equipment and household products manufacturing, focusing on the multi-billion dollar Direct Response Industry. This press release contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. With the exception of historical information contained herein, the matters discussed in this press release involve risk and uncertainties. Actual results could differ materially from those expressed in any forward-looking statement. All trademarks are properties of their respective owners. - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----