SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made and entered into by and
between Sunborne XII, LLC, Caleb Development, LLC and Woodmen Joint Venture, LLP
(collectively "Sunborne") and Circuit Technology, Inc. f/d/b/a Circuit
Technology Corporation ("CTC"), CirTran Corporation, Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx, and Xxxx Xxxxxxxx (collectively "the CirTran Parties"). Sunborne and
the CirTran Parties are jointly referred to as "Parties" and singularly as
"Party".
Recitals
This Agreement is entered into with reference to the following facts:
A. Sunborne is the owner of an office/warehouse building located at
3650-3750 North Nevada Avenue, Colorado Springs, El Paso County, Colorado (the
"Property"), the same having the following legal description: Xxxx 0 xxx 0,
Xxxxx 0, XXX Subdivision No. 2, El Paso County, Colorado.
B. Pursuant to a Net Lease dated January 8, 1998 ("Master Lease"),
Sunborne leased to ETA Technologies Corporation ("ETA") approximately 142,500
square feet of the Property. Subsequently, ETA assigned its leasehold interest
to Colorado Electronics Corporation ("CEC").
C. Pursuant to a Sublease dated November 30, 1998 (the "Sublease"), CEC
sublet to CTC approximately 71,500 square feet of the Property (the "Leased
Premises").
D. On or about December 4, 1998, CTC leased approximately 17,327
rentable square feet of the Leased Premises to Parkway Products, Inc.
("Parkway"). In or about October 1999, Parkway vacated its portion of the Leased
Premises and ceased paying rent to CTC. The Parties claim that Parkway is in
breach of its sublease and that they have a concurrent right to assert claims
against Parkway for damages (the "Parkway Claim").
E. At or about the time CTC occupied the Leased Premises, CTC acquired
certain equipment and furniture from Sunborne, which furniture and equipment was
formerly owned by CEC (the "CEC personal property"). CTC utilized the CEC
personal property in its manufacturing and fabricating operations in the Leased
Premises.
F. In December 1999, CTC defaulted on its Sublease and on other
agreements with Sunborne, as a result of which Sunborne retook possession of the
Leased Premises.
G. Sunborne has filed suit against the CirTran Parties in the District
Court of El Paso County, Colorado, Case Xx. 00 XX 0000 ("xxx Lawsuit). Sunborne
claims that CTC is in breach of the Master Lease and the Sublease, that CTC is
liable for damages for such breach, that Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx and Xxxx
Xxxxxxxx are jointly and severally liable for such damages as personal
guarantors, and that CirTran is concurrently liable for such damages as a
fraudulent transferee of CTC's assets and as a successor corporation of CTC. The
CirTran Parties claim, among other things, that Sunborne failed to mitigate its
damages. In addition, CTC has asserted a counterclaim against Sunborne for
damages resulting from the theft and/or loss of equipment, inventory and
furniture belonging to CTC while such personal property was in the custody and
control of Sunborne after it retook possession of the Leased Premises. All of
the claims and counterclaims in the Lawsuit are collectively referred to herein
as "the Claims".
H. Recognizing the uncertainties and expense of a trial, the Parties
hereto desire to settle, adjust and compromise the claims and disputes between
them.
Agreement
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and the payment of the sums herein specified, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Settlement Payments.
a. The CirTran Parties shall pay to Sunborne the sum of Two Hundred
Fifty Thousand Dollars ($250,000.00) (the "Settlement Amount"), payable as
follows:
i. $25,000.00 upon execution of this Agreement.
ii. $225,000.00, together with interest at the rate of 8% per
annum hereafter, payable within six (6) months from the date of this Agreement.
Said amount shall be evidenced by a Confession of Judgment in the form attached
hereto as Exhibit A, signed by the CirTran Parties, and delivered to Sunborne
contemporaneously with the execution of this Agreement.
2. Settlement Terms.
a. The Confession of Judgment may be filed with the court only if the
Settlement Amount is not fully paid within six (6) months from the date of this
Agreement. Upon the entry of a judgment against the CirTran Parties in
accordance with the Confession of Judgment, there shall be a stay of execution
on such judgment for a period of six (6) months; provided, however, that upon
the filing of the Confession of Judgment Sunborne may begin liquidating the
CirTran stock held in escrow as security for the payment of the Settlement
Amount, as provided herein.
b. Sunborne hereby conditionally assigns to the CirTran Parties any and
all rights it may have in and to the Parkway Claim; provided, however, that the
Net Proceeds of any such settlement or collection shall be distributed as
follows:
75% to the CirTran Parties (the "CirTran Parties' Share of Net
Proceeds")
25% to Sunborne (the "Sunborne's Share of Net Proceeds").
"Net Proceeds" is defined as gross proceeds of settlement or collection, less
attorney fees and costs incurred by the CirTran Parties in prosecution of the
Parkway Claim, which attorney fees and costs shall first be reimbursed to the
CirTran Parties out of any such settlement or collection. No portion of
Sunborne's Share of Net Proceeds shall be credited against the Settlement
Amount. In addition, the CirTran Parties' Share of Net Proceeds shall be paid to
Sunborne to the extent there is any outstanding balance owed on the Settlement
Amount. Once the Settlement Amount has been paid in full, the CirTran Parties'
Share of Net Proceeds may be retained by the CirTran Parties.
c. Sunborne agrees to cooperate with and assist fully the CirTran
Parties in their prosecution of the Parkway Claim. Such cooperation and
assistance includes, but is not limited to, providing documentation in the
possession of Sunborne and testimony by Sunborne employees or agents, if deemed
appropriate by counsel for the CirTran Parties.
d. If the CirTran Parties fail to timely register the shares (ref.
Para. 3 below) or abandon or fail to diligently pursue the Parkway Claim, the
conditional assignment shall expire, and Sunborne shall have the sole and
exclusive rights to and ownership of the Parkway Claim, where after Sunborne
shall be entitled to retain 100% of all Net Proceeds without crediting any
portion thereof to the Settlement Amount. Abandonment or failure to prosecute
shall be conclusively presumed to have occurred if the Parkway Claim is not
resolved or suit filed within ninety (90) days of the date of this Agreement.
3. Security for Payment of Settlement Amount.
a. As security for payment of the Settlement Amount to Sunborne,
CirTran shall, within twenty days following the execution of this Agreement,
cause to be issued three million (3,000,000) shares of CirTran common stock to
be held in escrow for the benefit of Sunborne by a regulated and licensed
brokerage firm. The shares shall be represented by one or more certificates in
the form adopted by CirTran's Board of Directors for its common shares and shall
bear appropriate legends regarding transferability and the terms of this
Agreement. The shares shall, at their issuance to Sunborne, be "restricted
securities" as that term is defined in the federal securities laws, and Sunborne
hereby acknowledges and agrees, in connection with its receipt of the shares,
that (1) it is acquiring the shares hereunder for investment purposes and
without any intent to their further distribution or violation of the federal
securities laws, (2) the shares have not been registered under either the
federal or state securities laws and that they are, therefore, subject to
restrictions on transfer, (3) Sunborne is an "accredited investor," as that term
is defined under Regulation D of the Securities Act of 1933, as amended, and (4)
Sunborne has had the opportunity to review CirTran's filings with the Securities
and Exchange Commission ("SEC").
b. If CirTran has not paid at least 75% of the amounts referenced in
paragraph 1.a.ii before the end of the four-month period following the execution
of this Agreement, CirTran shall, at its expense, promptly prepare and file with
the SEC a registration statement on a form designated by CirTran covering such
shares, and shall use diligent commercial efforts to have the registration
statement declared effective by the SEC. If any portion of the Settlement Amount
remains unpaid after six months from the date of this Agreement, and provided
that the registration statement for the shares has been declared effective by
the SEC, Sunborne and the escrow agent may commence selling such shares for the
account of Sunborne, subject to the restrictions set forth below. All proceeds
from the sale of such CirTran common stock (less commissions) shall be credited
toward payment of the Settlement Amount, and Sunborne shall render an accounting
to the CirTran Parties of all such sales of CirTran common stock not later than
the 10th day of each calendar month following the first sale of such common
stock. If, within six (6) months, the registration of the escrowed shares of
CirTran common stock is not completed and such shares are not replaced with
registered, free-trading CirTran common stock in an amount sufficient to allow
for the sale of the maximum number of shares under the restrictions set forth in
subparagraph d. below, Sunborne may file the Confession of Judgment and proceed
with execution thereon.
c. It is the intent of the Parties that, once the Settlement Amount is
fully paid, by whatever means and form of payment, the CirTran Parties shall
have no further obligations to Sunborne. Thus, at such time as the Settlement
Amount is paid in full, Sunborne (a) shall execute joint instructions to the
escrow agent holding the CirTran stock to return all remaining unsold shares of
CirTran stock, as well as proceeds from the sale of CirTran stock, to CirTran,
(2) shall return to the CirTran Parties the Confession of Judgment or, if the
same has been filed with the court, shall execute and file a satisfaction of
judgment, and (3) shall execute and deliver to the CirTran Parties a complete
Release in the form attached hereto as Exhibit B.
d. Sunborne shall be restricted to the sale, on any single day, of no
more than 50% of the average daily volume of CirTran's traded shares of common
stock, based upon the prior calendar month's average daily volume. Thus, by way
of example, if the average daily volume is equal to 80,000 shares, Sunborne may
sell no more than 40,000 shares in any one trading day. As a further
restriction, Sunborne shall be authorized to sell shares no more frequently than
three (3) trading days per week.
e. Sunborne acknowledges that the CirTran Parties have not made, and do
not make, any representations regarding the value of the CirTran stock to be
held as security for the payment of the Settlement Amount. The Parties
acknowledge that CirTran common stock is currently traded on the "pink sheets"
of the over-the-counter (OTC) securities markets. Sunborne acknowledges that it
has made its own due diligence investigation as to the value of CirTran's common
stock.
4. Mutual Release. Except for the obligations set forth herein, each Party,
for himself or itself, and on behalf of its employees, agents, subsidiaries,
partners, partnerships, related entities, affiliates, predecessors, trustees,
successors and assigns, hereby releases and forever discharges the other
Parties, their shareholders, directors, officers, employees, agents, attorneys,
subsidiaries, partners, partnerships, parent, related entities, affiliates,
predecessors, trustees, successors and assigns, from all claims, demands,
actions, damages, injuries, costs, causes of action and liabilities, legal and
equitable, foreseen or unforeseen, which each Party may own or hold as of the
Effective Date of this Agreement, or has at any time heretofore owned or held as
against the other Parties, and which arise from, relate to or concern the
Property, the Claims set forth above, and any claims asserted in the Lawsuit.
5. Dismissal of Claims. Within twenty days after the Effective Date of this
Agreement, the Parties shall file a Stipulation in the Lawsuit dismissing with
prejudice CTC's counterclaim against Sunborne. Within twenty days after the
Settlement Amount is paid in full, the Parties shall file a Stipulation in the
Lawsuit dismissing with prejudice all remaining claims.
6. Different Facts. The Parties, and each of them, acknowledge that they
are fully familiar with the facts and assumptions giving rise to this Agreement,
but agree that this Agreement shall remain fully effective and binding as to
each of them even if the facts or assumptions turn out to be different from what
they now believe them to be.
7. No Admission. The Parties acknowledge that this Agreement constitutes
the settlement of disputed claims and that entering into this Agreement shall
not constitute an admission of fault, wrongdoing, liability, or responsibility
by a Party.
8. Costs and Fees. Each Party shall pay his, her or its own costs and
attorneys' fees in connection with the Lawsuit, the preparation and execution of
this Agreement and any related documents.
9. No Previous Assignment. Each Party represents and warrants that it has
not assigned or otherwise transferred, or purported to assign or otherwise
transfer, to any party, directly or indirectly, voluntarily, involuntarily or by
operation of law, any rights, claims or causes of action which it may have
against the other Party, or any damages, liabilities, losses and costs being
released by this Agreement. The Parties each agree to indemnify and hold the
other harmless from and against all claims, demands, actions, damages, injuries,
costs, causes of action and liabilities of any nature suffered or incurred as a
result or any assignment or transfer, or purported assignment or transfer, in
breach of the representation and warranty contained in this paragraph.
10. Entire Agreement. This Agreement contains the entire agreement and
understanding between the Parties as to the subject matter of the Agreement, and
supersedes all prior agreements, representations, and discussions between the
Parties concerning that subject matter. Each Party further declares and
represents that, in entering into this Agreement, it has not relied on any
promise, inducement, representation, warranty, agreement, or other statement not
set forth in this Agreement.
11. Nonwaiver. None of the provisions of this Agreement shall be considered
waived by a Party unless such waiver is given in writing. The failure of a Party
to insist in any one or more instances upon strict performance of any of the
provisions of this Agreement or to take advantage of any of its rights hereunder
shall not be construed as a waiver of any such provisions or the relinquishment
of any such rights for the future, but the same shall continue and remain in
full force and effect.
12. Effect of Subject Headings. Subject headings in this Agreement are
inserted for convenience only, and shall not be construed as interpretations of
text.
13. Gender. Words used in this Agreement, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
14. Governing Law. This Agreement shall be interpreted, governed, and
construed under the laws of the State of Colorado.
15. Amendment. This Agreement may not be altered or modified by either of
the Parties except by an instrument in writing executed by each of them.
16. Further Assurances. The Parties agree to cooperate promptly and fully
in providing and/or executing such additional documents and taking such other
actions as may later be determined to be reasonably necessary to effectuate the
provisions of this Agreement.
17. Review of Agreement; Construction. The Parties acknowledge that they
have read and understood this Agreement and further acknowledge that, in
entering into this settlement, they have been advised by independent attorneys
of their choice. Further, each Party has cooperated in the drafting and
preparation of this Agreement. Hence, in any construction to be made of this
Agreement, the same shall not be construed against either Party on the basis
that the Party was the drafter.
18. Attorneys' Fees and Costs. In the event that any action, arbitration or
proceeding is brought to enforce or interpret this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees, costs and
expenses actually incurred in such action, arbitration or proceeding.
19. Signature Clause. Each Party represents and warrants that the person
who signs below on behalf of that Party has been duly authorized to execute this
Agreement on behalf of that Party without the further concurrence or approval of
any person, entity or court.
20. Multiple Originals; Facsimiles. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute a single document binding on all the
Parties hereto, notwithstanding that all such Parties are not signatories to the
original or the same counterpart. This Agreement may be executed by facsimile
signatures, which shall have the same force and effect as original signatures.
21. Effective Date. This Agreement shall become effective on the date the
last of the Parties listed below signs this Agreement ("Effective Date").
22. Survivability. Representations, obligations, remedies and warranties
contained in this Agreement shall survive the Closing of this Agreement.
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the day
and year set forth next to their respective signatures.
SUNBORNE:
SUNBORNE XII, LLC
By:_____________________________ Dated: January ____, 2002.
Its Manager
CALEB DEVELOPMENT, LLC
By:_____________________________ Dated: January ____, 2002.
Its Manager
WOODMEN JOINT VENTURE, LLP
By:_____________________________ Dated: January ____, 2002.
Its General Partner
CIRTRAN PARTIES:
CIRCUIT TECHNOLOGY, INC.
f/d/b/a CIRCUIT TECHOLOGY CORPORATION
By:_____________________________ Dated: January ____, 2002.
Its Former President
CIRTRAN CORPORATION
By:_____________________________ Dated: January ____, 2002.
Its President
________________________________ Dated: January ____, 2002.
XXXXX XXXXXXXX
________________________________ Dated: January ____, 2002.
XXXXX XXXXXXXX
________________________________ Dated: January ____, 2002.
XXXX XXXXXXXX
STATE OF COLORADO )
) ss.
COUNTY OF EL PASO )
Subscribed and sworn to before me this ___ day of January, 2002 by
XxXxx Xxxxxxxx, as Manager of Sunborne XII, LLC and Caleb Development, LLC, and
as General Partner of Woodmen Joint Venture, LLP.
Witness my hand and seal.
-----------------------------
Notary Public
State of Colorado
My commission expires:
STATE OF UTAH )
) ss.
COUNTY OF _____ ___ )
Subscribed and sworn to before me this ___ day of January, 2002 by
Xxxxx Xxxxxxxx, individually, as the former President of Circuit Technology,
Inc., and as President of CirTran Corporation.
Witness my hand and seal.
-----------------------------
Notary Public
State of Colorado
My commission expires:
STATE OF CALIFORNIA )
) ss.
COUNTY OF __________ )
Subscribed and sworn to before me this ___ day of January, 2002 by Xxxx
Xxxxxxxx.
Witness my hand and seal.
-----------------------------
Notary Public
State of California
My commission expires:
STATE OF CALIFORNIA )
) ss.
COUNTY OF __________ )
Subscribed and sworn to before me this ___ day of January, 2002 by
Xxxxx Xxxxxxxx.
Witness my hand and seal.
-----------------------------
Notary Public
State of California
My commission expires:
Approved as to Form:
------------------------------ ------------------------------
Xxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
Attorney for Sunborne Attorney for CirTran
------------------------------ ------------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxxx
Attorney for CTC Attorney for Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx and Xxxx Xxxxxxxx
EXHIBIT A
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DISTRICT COURT, EL PASO COUNTY, COLORADO
Court Address: 00 X. Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Plaintiff(s): SUNBORNE XII, LLC, )
a Colorado limited liability company )
) COURT USE ONLY
Defendant(s): CIRCUIT TECHNOLOGY )
CORPORATION, a Utah corporation ) Case Number: 99 CV 2870
)
Third Party Defendant(s): XXXXX XXXXXXXX, ) Div. 3 Ctrm: _________
XXXXX XXXXXXXX and XXXX XXXXXXXX )
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CONFESSION OF JUDGMENT
--------------------------------------------------------------------------------
Defendants Circuit Technology, Inc. f/d/b/a Circuit Technology
Corporation, CirTran Corporation, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, and Xxxx
Xxxxxxxx, hereby confess judgment, jointly and severally, in favor of Plaintiff
Sunborne XII, LLC for the principal sum of $225,000.00, said sum to bear
interest at the rate of 8% per annum from the date hereof.
Dated as of the ____ day of _____________, 2002.
CIRCUIT TECHNOLOGY, INC.
f/d/b/a CIRCUIT TECHNOLOGY CORPORATION
By: _______________________________
Its Former President
EXHIBIT A
(Signatures continued on next page)
CIRTRAN CORPORATION
By: _______________________________
Its Former President
-----------------------------------
XXXXX XXXXXXXX
-----------------------------------
XXXXX XXXXXXXX
-----------------------------------
XXXX XXXXXXXX
RELEASE
Sunborne XII, LLC, Caleb Development, LLC and Woodmen Joint Venture,
LLP (collectively "Releasors"), for themselves, and on behalf of their
employees, agents, subsidiaries, partners, partnerships, related entities,
affiliates, predecessors, trustees, successors and assigns, hereby release and
forever discharge Circuit Technology, Inc. f/d/b/a Circuit Technology
Corporation, CirTran Corporation, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, and Xxxx
Xxxxxxxx (collectively "Releasees"), their shareholders, directors, officers,
employees, agents, attorneys, subsidiaries, partners, partnerships, parent,
related entities, affiliates, predecessors, trustees, successors and assigns,
from all claims, demands, actions, damages injuries, costs, causes of action and
liabilities, legal and equitable, foreseen or unforeseen, which each Releasors
may own or hold as of the date of this Release, or has at any time heretofore
owned or held as against Releasees, and which arise from , relate to or concern
the following:
1. The property located at 3650-3750 North Nevada Avenue,
Colorado Springs, El Paso County, Colorado, the same having
the following legal description: Xxxx 0 xxx 0, Xxxxx 0, XXX
Subdivision No. 2, El Paso County, Colorado;
2. The claims set forth in the Settlement Agreement between the
parties dated January ___, 2002; and
3. The claims set forth in Case Xx. 00 XX 0000, Xxxxxxxx Xxxxx
xx Xx Xxxx Xxxxxx, Colorado.
Dated this _____ day of ____________________, 2002.
SUNBORNE XII, LLC
By: _______________________________
Its Manager
CALEB DEVELOPMENT, LLC
By: _______________________________
Its Manager
WOODMEN JOINT VENTURE, LLP
By: _______________________________
Its General Partner
EXHIBIT B
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DISTRICT COURT, EL PASO COUNTY, COLORADO
Court Address: 00 X. Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
----------------------------------------------
Plaintiff(s): SUNBORNE XII, LLC, )
a Colorado limited liability company )
) COURT USE ONLY
Defendant(s): CIRCUIT TECHNOLOGY )
CORPORATION, a Utah corporation ) Case Number: 99 CV 2870
)
Third Party Defendant(s): XXXXX XXXXXXXX, ) Div. 3 Ctrm: _________
XXXXX XXXXXXXX and XXXX XXXXXXXX )
----------------------------------------------
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ORDER APPROVING SETTLEMENT AGREEMENT
--------------------------------------------------------------------------------
This matter comes before the Court pursuant to a Joint Motion to
Approve Settlement Agreement. The Court, having reviewed the Settlement
Agreement, hereby ORDERS:
The Settlement Agreement is approved. The trial scheduled for April 2,
2002 is vacated.
Dated this _____ day of _____________, 2002.
BY THE COURT:
---------------------------------
District Court Judge
