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SETTLEMENT AGREEMENT
This Settlement Agreement is made and entered into by and between
CirTran Corporation, a Nevada corporation ("Cirtran") and Xxxxxx X. Xxxxxx
("Xxxxxx").
WHEREAS, Xxxxxx was employed by Cirtran or its subsidiaries until June
14, 2007 pursuant to an Employment Agreement dated as of June 1, 2004, as
amended (the "Employment Agreement"); and
WHEREAS, as disclosed in its Form 8-K filed on June 20, 2007, Cirtran
purported to terminate Xxxxxx'x employment for cause and Xxxxxx disputes whether
Cirtran had just cause for doing so. The parties desire to resolve such dispute.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Termination of Employment. Xxxxxx acknowledges that (i) the
Employment Agreement, (ii) his employment with Cirtran and its subsidiaries, and
(iii) all of his positions as officer or director of Cirtran and its
subsidiaries terminated effective June 14, 2007 (the "Separation Date"). The
parties agree that Xxxxxx shall be entitled to no post-termination payments or
benefits, under the Employment Agreement or otherwise, except as expressly
provided herein. As of the Separation Date, Xxxxxx held vested stock options to
purchase 4,000,000 shares of Cirtran stock. By this Agreement, Xxxxxx hereby
forfeits and surrenders his right to exercise such options.
2. Separation Benefits. Subject to Xxxxxx'x full and continued
performance of his obligations under this agreement, Cirtran shall provide
Xxxxxx with the following separation benefits and payments (the "Separation
Benefits"):
(a) Cirtran will pay to Xxxxxx an amount equal to the
base salary Xxxxxx would have received under the Employment Agreement for the
twelve months following the Separation Date. Such payments shall be made in
installments on Cirtran's customary payroll dates commencing on the first
payroll date after full execution of this Agreement. To the extent Cirtran
determines it is required to do so by law, Cirtran will deduct from the gross
payment to Xxxxxx all required and customary withholdings and deductions
consistent with prior practice.
(b) For the quarter ended June 30, 2007, Cirtran will pay
to Xxxxxx $5,056.89, which is an amount equal to the quarterly bonus he would
have received pursuant to Section 3(b)(i) of the Employment Agreement had it
remained in effect. Such bonus shall be paid within five (5) days after the full
execution of this Agreement. To the extent Cirtran determines it is required to
do so by law, Cirtran will deduct from the gross payment to Xxxxxx all required
and customary withholdings and deductions consistent with prior practice.
(c) Upon full execution of this Agreement, Cirtran shall
instruct its transfer agent to promptly issue 1,000,000 shares of Cirtran's
common stock (the "Shares") to Xxxxxx and an additional 1,000,000 shares of
Cirtran's common stock will be issued during the first week of October and
December, 2007 and February, 2008 for a total of 4,000,000 shares (the
"Shares"). The Shares will constitute "restricted securities" as defined in Rule
144 promulgated under the Securities Act of 1933, as amended (the "1933 Act"),
and certificates for the Shares will bear appropriate restrictive legends. The
Shares will be valued at the last sale price for Cirtran's stock on the trading
day preceding the date of full execution of this Agreement. All withholdings
required with respect to the issuance of such Shares shall be deducted from the
cash payments pursuant to Paragraphs 2(a) and (b) above as the Shares are
issued.
(d) Cirtran will xxxxx Xxxxxx a profits interest in
certain distributions it may receive from After Xxx Group, LLC ("AfterBev"), as
described in Paragraph 4 below.
(e) For the twelve months ending June, 2008, Cirtran will
pay Xxxxxx an allowance of up to $500.00 per month to cover premiums paid by
Xxxxxx on his personal health, dental and/or life insurance policies (including
any policies he may maintain pursuant to COBRA). Such allowance shall be paid to
Xxxxxx within five (5) days after full execution of this Agreement for the
months of July and August, 2007 and thereafter on or before the 10th of each
month.
(f) Xxxxxx will be entitled to retain the tangible
personal property he removed from his office on or about the Separation Date,
including the laptop computer which Cirtran had previously issued to him. Such
tangible personal property does not include any Cirtran records, files or data,
and Xxxxxx will promptly return to Cirtran any Cirtran records, files or data in
his possession.
(g) For so long as Cirtran maintains its corporate
membership at the Grand Havana Room, Xxxxxx will be entitled to retain his
admission card based on the corporate membership; provided that Xxxxxx complies
with the rules and regulations of the Grand Havana Room and pays for all
expenses he incurs, including food, beverages and cigars. Cirtran may terminate
its membership at any time in its sole discretion. Although Cirtran's corporate
membership derived from Xxxxxx'x original personal membership, Xxxxxx agrees
that he will not take any action which would cause the corporate membership to
terminate or be converted back to a personal membership without Cirtran's prior
written consent.
(h) Within two business days after complete execution of
this Agreement, Cirtran will pay Xxxxxx $4,965.15, representing (i) unpaid car
allowance and insurance allowance for the month of June, 2007 and (ii) unpaid
salary for the period from the last payroll date preceding the Separation Date
through the Separation Date. Cirtran will deduct from the gross payment to
Xxxxxx all required and customary withholdings and deductions consistent with
prior practice.
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3. American Express. During the term of Xxxxxx'x employment,
Cirtran made available to him a corporate American Express charge card (the
"AmEx Card"). Xxxxxx shall cease further use of the AmEx Card. The parties
acknowledge that Xxxxxx incurred $20,419.81 of charges on the AmEx Card during
the May and June, 2007 billing cycles which are not business expenses
reimbursable by Cirtran (the "Excess Charges"). Xxxxxx agrees to reimburse
Cirtran for the Excess Charges as follows: Xxxxxx agrees that Cirtran shall be
entitled to deduct one-twelfth of the Excess Charges (i.e. $1,706.65) from each
of the first twelve payments otherwise due to Xxxxxx pursuant to Paragraph 2(a)
hereof until paid in full.
4. AfterBev Profits Interest. So long as Cirtran is a member of
AfterBev, Cirtran shall pay to Xxxxxx 5% of the net cash distributions received
by Cirtran or it subsidiaries from business operations of AfterBev or upon
liquidation of AfterBev (the "Payments"), pursuant to Sections 4.5 and 4.7 of
the AfterBev Operating Agreement (the "Operating Agreement"), as the Operating
Agreement may be amended from time to time. The term "net cash distributions"
means the distributions actually received by Cirtran, after deduction of profits
interests or other assignments of such payments committed to by Cirtran
including the profits interests granted to Xxxx Xxxx and Xxxxxx Xxxxx, as well
as the profits interests proposed to be issued to certain investors. Xxxxxx
acknowledges that Cirtran may from time to time in its sole discretion sell part
or all of its interest in AfterBev to third parties free of Xxxxxx'x profit
interest, grant additional profit interests or otherwise reduce the net cash
distributions which it is entitled to receive from AfterBev. Cirtran will pay
the profits interest to Xxxxxx within thirty (30) days after receipt of a
Payment from AfterBev. Each payment of the profits interest shall be accompanied
by a written statement from Cirtran describing (i) the gross Payment from
AfterBev received by Cirtran, (ii) the deductions taken for profits interests or
other assignments as described above, and (iii) the net amount paid to Xxxxxx.
5. Future Transactions. Xxxxxx may from time to time present
Cirtran with products, concepts, contacts or proposals related to Cirtran's
business which Xxxxxx has independently developed and which were not otherwise
available to Cirtran. Cirtran is under no obligation to pursue any matter
presented by Xxxxxx, but it may do so if the parties are able to mutually agree
on compensation payable to Xxxxxx with respect thereto. Cirtran acknowledges
that if it does not pursue a matter independently developed by Xxxxxx, Xxxxxx
may pursue the matter himself or through third parties.
6. No Disparagement. Cirtran agrees not to make any oral or
written statement that disparages Xxxxxx, and Xxxxxx agrees not to make any oral
or written statement that disparages Cirtran or any of its affiliates (including
any of its past or present officers, employees, members, managers, parents,
subsidiaries, operations, products, services, competitive practices or
reputation). Without limiting the generality of the foregoing, Xxxxxx shall not
post disparaging or negative remarks on chat rooms or bulletin boards regarding
Cirtran or its stock, whether such postings are under Xxxxxx'x own name or under
a pseudonym or screen name. There shall be an irrebuttable presumption that
postings from a screen name are from Xxxxxx if Cirtran notifies Xxxxxx of
disparaging postings from such screen name and Xxxxxx does not certify, by
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notice to Cirtran within fifteen (15) days after Cirtran's notice, that he is
not responsible for the screen name.
7. Non-Solicitation. Xxxxxx further agrees that during the period
ending two years after the Separation Date (the "Restrictive Period") he will
not, directly or indirectly, for his benefit or for the benefit of any other
person or entity, do any of the following: (i) solicit from any customer doing
business with the Company as of the Separation Date any business of the same or
of a similar nature to the business of the Company with such customer; (ii)
employ, recruit or solicit the employment or services of any person who was
employed by the Company upon the Separation Date. Notwithstanding clause (i)
above, if during the period while payments under Paragraph 2(a) are due the
Company cannot determine from a review of its records that during the term of
his employment Xxxxxx had contact with or was made aware of a customer which the
Company believes that Xxxxxx is soliciting or has solicited business from, then
before exercising its remedies for a breach of this paragraph due to such
solicitation, the Company shall first notify Xxxxxx. During the ten (10) days
following such notice, if applicable, the parties will attempt in good faith to
negotiate a mutually agreeable resolution of the alleged breach. If the parties
are unable to reach such a resolution, the Company may pursue its other remedies
under this Agreement.
8. Confidentiality. Xxxxxx acknowledges that he continues to be
bound by all confidentiality agreements entered into by him with Cirtran during
the term of his employment including the Employment Agreement and Cirtran's
Employee Manual.
9. Investment Representations. In order to induce Cirtran to
issue the Shares to him, Xxxxxx represents as follows:
(a) Xxxxxx understand that the Shares have not been
registered under federal or state securities laws, and are being offered and
sold pursuant to an exemption from registration contained in the 1933 Act based
in part upon the representations of Xxxxxx contained herein. Xxxxxx understand
that the Shares are characterized as "restricted securities" under the 1933 Act
and may be resold without registration under the 1933 Act only in certain
limited circumstances. Xxxxxx understands that the certificate representing the
Shares will bear a restrictive legend to the following effect:
The securities represented by this certificate are not
registered under federal or state securities laws. They may
not be sold or offered for sale in the absence of effective
registration under such securities laws or an opinion of
counsel satisfactory to the Company that such registration is
not required.
(b) Xxxxxx understands that the Shares involve
substantial investment risk. Xxxxxx has experience as an investor in securities
of small capitalization, over-the-counter companies. Xxxxxx can bear the
economic risk of his ownership of the Shares (including the risk of total loss)
and has such knowledge and experience in financial or business matters that he
is capable of evaluating the merits and risks of the Shares. As a former
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executive officer of Cirtran, Xxxxxx is fully informed regarding Cirtran and is
fully aware of the risks of its business and financial condition.
(c) The Shares are being acquired by Xxxxxx for
investment for Xxxxxx'x own account, not as a nominee or agent, and not with a
view to the public resale or distribution thereof within the meaning of the 1933
Act, and Xxxxxx has no present intention of selling, granting any participation
in, or otherwise distributing the same.
10. Release. Xxxxxx, for himself, his heirs, executors and
assigns, if any, for and in consideration of the Separation Benefits and any
other consideration provided herein, and other good and valuable consideration,
the receipt of which is hereby acknowledged, does hereby waive, release and
forever discharge Cirtran, and its past, present and future subsidiaries,
managers, directors, shareholders, officers, agents, employees, attorneys,
representatives, predecessors, successors, and assigns, if any, of and from any
and all claims, causes of action, damages, attorneys' fees, costs and all other
liabilities of any kind or description whatsoever, either in law or equity,
whether known or unknown, suspected or unsuspected, including without
limitation, any claims of breach of express or implied contract, unlawful
termination, retaliation, defamation of character, personal injury, intentional
or negligent infliction of emotional distress, violation of public policy,
discrimination based on race, religion, sexual orientation, age (including any
claim under the federal Age Discrimination in Employment Act), color, handicap
and/or disability, national origin or otherwise, or any other claim based on his
employment with Cirtran, or the termination thereof, that he now has or may
claim to have in the future, arising from the beginning of time up to and
including the date of this Agreement, and does hereby covenant not to file any
administrative claim or lawsuit to assert any such claims.
Cirtran, for itself, its successors and assigns, if any, for and in
consideration of Xxxxxx'x release and any other consideration provided herein,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, does hereby waive, release and forever discharge Xxxxxx, and his
heirs, executors and assigns, if any, of and from any and all claims, causes of
action, damages, attorneys' fees, costs and all other liabilities of any kind or
description whatsoever, either in law or equity, whether known or unknown,
suspected or unsuspected, including without limitation, any claims of breach of
express or implied contract, defamation of character, personal injury,
intentional or negligent infliction of emotional distress, violation of public
policy, or any other claim based on Xxxxxx'x employment with Cirtran, or the
termination thereof, that it now has or may claim to have in the future, arising
from the beginning of time up to and including the date of this Agreement, and
does hereby covenant not to file any administrative claim or lawsuit to assert
any such claims.
Each party also acknowledges that he or it may hereafter discover facts
that occurred prior to the execution of this Agreement, that are different from,
or in addition to, those which he or it now knows to be true and agrees that
this Agreement and the releases contained herein be and remain effective in all
respects notwithstanding such different or additional facts or discovery
thereof. Each Party expressly waives the benefit of any statute or rule of law,
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if any, that might otherwise limit the scope of this Agreement because of
unknown matters existing from the beginning of time to the date of execution of
this Agreement, whether material or otherwise, excluding only such matters that
arise solely from and relate directly to the obligations of the Parties with
respect to this Agreement. In particular, each Party waives the benefit of and
acknowledges that he or it has been advised by legal counsel and is familiar
with the provisions of California Civil Code ss.1542, which provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his or her favor at the time of
executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor."
11. No Admissions. This Agreement shall not be construed as an
admission of liability on the part of any of the Parties of any kind or nature
whatsoever as to any matter.
12. Cooperation After Termination. During the term of this
Agreement and thereafter, Xxxxxx agrees to cooperate with any reasonable request
of Cirtran to participate in the preparation for, response to, prosecution of
and/or defense of any pending, actual or threatened litigation regarding Cirtran
based on or involving actions that took place during Xxxxxx'x employment. Such
cooperation shall include, but not be limited to, appearing as a fact witness or
deponent, assisting Cirtran's counsel with their factual preparation, reviewing
deposition transcripts and other discovery material. Cirtran will reimburse
Xxxxxx for all reasonable expenses Xxxxxx incurs as a result of such
cooperation, other than the cost of any separate counsel Xxxxxx elects to
retain, and insofar as possible will schedule any activities requested of Xxxxxx
so as to not unreasonably interfere with his personal and business schedule.
13. Legal Remedies. If Xxxxxx defaults under any material
continuing obligations under this Agreement, Cirtran may cease payment of any
remaining Separation Payments. Notwithstanding the above, if the default is of a
nature which can be cured, before ceasing Separation Payments, Cirtran will
notify Xxxxxx of the default and allow him at least ten (10) days to fully cure
the default. Cirtran and Xxxxxx agree that any disagreements, disputes or claims
arising under or related to this Agreement, including but not limited to claims
of discrimination or wrongful termination, shall be resolved exclusively by
arbitration before a single arbitrator in the English language in Salt Lake
City, Utah in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction over the matter,
each party to bear the respective costs of the arbitration. The parties also
agree that the AAA Optional Rules for Emergency Measures of Protection shall
apply to the proceedings.
14. Entire Agreement. This Agreement supersedes any prior
agreements or understandings, oral or written, between the parties hereto and
contains the entire understanding of Cirtran and Xxxxxx with respect to the
subject matter hereof.
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15. Modification. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by mutual agreement of
the parties in a written instrument executed by Cirtran and Xxxxxx, or their
legal representatives.
16. Severability. If any provision of this Agreement or the
application thereof is held invalid, such invalidity shall not affect other
provisions or applications of the Agreement that can be given effect without the
invalid provision or application and, to such end, the provisions of this
Agreement are declared to be severable.
17. Attorneys' Fees. In the event of any arbitration concerning
any controversy, claim or dispute among the parties hereto, arising out of or
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.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
19. Governing Law. To the extent not preempted by Federal law, the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the State of Utah.
/s/ Xxxxxx Xxxxxx Date: August 15, 2007
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Xxxxxx X. Xxxxxx
CIRTRAN CORPORATION
By: /s/ Xxxxx Xxxxxxxx Date: August __, 2007
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Xxxxx Xxxxxxxx, President
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