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ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into
effective as of May 15, 2007, by and among Diverse Media Group, Inc., a Delaware
corporation (the "Company"), Diverse Media Group Corp., a Utah corporation
("Investor"), and Xxxxxx-Xxxxx & Co., Inc., a Utah corporation (the "Agent").
RECITALS
WHEREAS, the Company and Investor have entered into a Settlement and
Release dated May __, 2007 (the "Settlement Agreement") and attached hereto as
Exhibit A, pursuant to which the Company's affiliates, Diverse Talent Agency,
Inc. and Xxxxxxxxxxx Xxxxxx (together, "DT"), and Investor, its parent CirTran
Corporation, a Nevada corporation ("CTC"), and certain of CTC's officers and
directors, have agreed to, among other things, terminate their relationship and
agreements between them and return the assets to the Company contributed to
Investor;
WHEREAS, pursuant to Section 8 of the Settlement Agreement, DT has
agreed to cause the Company to issue 9,000,000 shares of the Company's common
stock, $0.001 par value (the "Shares") to the Agent for the benefit of Investor,
in consideration for, among other things, the return of the assets to the
Company described in the Settlement Agreement;
WHEREAS, the Shares are to be held by the Agent pending the
registration, sale or return of the Shares by Investor pursuant to the terms of
the Investor Rights Agreement dated May __, 2007 (the "Investor Rights
Agreement" and together with the Settlement Agreement, the "Transaction
Documents"), attached hereto as Exhibit B, between the Company and Investor;
WHEREAS, pursuant to Section 8 of the Settlement Agreement, the Company
has agreed to deposit with the Agent the certificates representing the Shares in
the name of Investor; and
WHEREAS, Investor has agreed, pursuant to Section 9 of the Settlement
Agreement and Section 5.2 of the Investor Rights Agreement, that once Investor
has sold Shares for net proceeds totaling $2,000,000, the Agent shall return any
remaining Shares to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained in this Agreement, and other valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties to this
Agreement agree as follows:
1. Delivery to the Agent.
(a) Contemporaneously with the execution of this Agreement the
Company has delivered to the Agent certificate(s) for the Shares (the
"Certificates") as listed on Exhibit C attached hereto in the name of Investor.
(b) Contemporaneously with the execution of this Agreement the
Company and Investor shall deliver to the Agent a copy of the Transaction
Documents.
2. Duties and Obligations of Agent. The duties of the Agent under the
terms of this Agreement are as follows:
(a) Establishment of Escrow. The Agent shall upon the execution
hereof receive from the Company and Investor and shall hold all of the
instruments, certificates and documents delivered to the Agent pursuant to
Section 1 hereof until delivered in accordance with Section 2(c) hereof.
(b) Establishment of Brokerage Account. The Agent will establish a
brokerage account (the "Brokerage Account") at Xxxxxx Xxxxx & Co., Salt Lake
City, Utah (the "Stockbroker") for the sole purpose of holding and selling the
Shares hereunder. The Brokerage Account shall be under the sole control of the
Agent; provided that duplicate copies of monthly statements and confirmations
shall be sent to Investor and the Company. The Agent may deposit some or all of
the Certificates in the Brokerage Account for safekeeping.
(c) Deliveries and Notices in Accordance with Instructions. Agent
shall deliver the Certificates in accordance with and provide the notices and
take all actions required by the instructions contained in Section 3 hereof.
3. Instructions to the Agent. The Company and Investor instruct the
Agent to hold and distribute the Certificates and the proceeds from the sale of
the Shares as follows:
(a) Rule 144 Sales. From time to time, commencing on the first
anniversary of the Settlement Agreement, Investor may instruct the Agent to sell
Shares through the Brokerage Account by delivering to the Agent, with a copy to
the Company, a notice substantially in the form of Exhibit D attached hereto
(the "144 Sale Notice"). If the 144 Sale Notice appears to be in proper form,
the Agent shall instruct the Stockbroker to sell through the Brokerage Account
in accordance with Rule 144 that number of Shares as were indicated in the 144
Sale Notice. If Certificates representing at least the number of Shares
requested to be sold are not already in the Brokerage Account, the Agent shall
cause such Certificates to be delivered to the Stockbroker prior to the
settlement date of any sales. The Agent, as nominee for Investor, shall complete
such standard forms as the Stockbroker or the Company shall require in
connection with such sales; provided that nothing contained herein shall require
the Agent to determine whether or not the sale or proposed sale of the Shares
complies with Rule 144. The proceeds from the sale of the Shares, net of
reasonable commissions and fees imposed by the Stockbroker or reasonable
underwriting expenses, commissions or discounts imposed by the underwriter, as
applicable (the "Net Proceeds"), shall be delivered to or at the direction of
Investor promptly after the settlement date of such sale; subject to the
limitations imposed by Sections 3(d) and 3(e).
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(b) Registered Sales. From time to time, Investor may instruct the
Agent to sell Shares pursuant to an effective registration under the Securities
Act of 1933, as amended (the "Securities Act"), by delivering to the Agent, with
a copy to the Company, a notice substantially in the form of Exhibit E attached
hereto (the "Registered Sale Notice"). If the Registered Sale Notice appears to
be in proper form and relates to a non-underwritten distribution, the Agent
shall instruct the Stockbroker to sell through the Brokerage Account in
accordance with the registration that number of Shares as were indicated in the
Registered Sale Notice. If Certificates representing at least the number of
Shares requested to be sold are not already in the Brokerage Account, the Agent
shall cause such Certificates to the delivered to the Stockbroker prior to the
settlement date of any sales. If the Registered Sale Notice appears to be in
proper form and relates to an underwritten distribution, the Agent shall
deliver, or cause the Stockbroker to deliver, to the underwriter Certificates
representing that number of Shares as were indicated in the Registered Sale
Notice. Nothing contained herein shall require the Agent to determine whether or
not the sale or proposed sale of the Shares complies with the registration
requirements or the Securities Act. The Net Proceeds from the sale of the Shares
shall be delivered to or at the direction of Investor promptly after the
settlement date of each sale; subject to the limitations imposed by Sections
3(d) and 3(e).
(c) Other Transactions. The Company and Investor may from time to
time jointly instruct the Agent in writing as to the disposition of any Shares
the beneficial ownership of which has been transferred by Investor other than
pursuant to Rule 144 or a registration under the Securities Act. If the
transferred Shares are to remain subject to the restrictions on transferability
created by the Investor Rights Agreement, the transferee shall become a party to
this Agreement and deemed an "Investor" hereunder.
(d) Bankruptcy Notice. As used herein, a "Bankruptcy Notice" is a
notice that the Agent and Investor receive from the Company certifying that (i)
Investor pursuant to or within the meaning of any bankruptcy law (1) has
commenced a voluntary case or proceeding, (2) has consented to the entry of an
order for relief against it in an involuntary case or proceeding, (3) has
consented to the appointment of a custodian of it or for all or substantially
all of its property, or (4) has made a general assignment for the benefit of its
creditors; or (ii) a court of competent jurisdiction has (i) entered an order or
decree under any bankruptcy law that is for relief against Investor in an
involuntary case or proceeding, (ii) appointed a custodian of Investor or for
all or substantially all of its property, or (iii) has ordered the liquidation
of the Investor, and such order has not been stayed for 60 days. If the Agent
has received a Bankruptcy Notice that has not been contested by Investor, then,
prior to delivering any Certificates pursuant to Sections 3(a), 3(b) or 3(c) the
Agent shall request confirmation from the Company that the first right of
refusal pursuant to Section 5.3 of the Investor Rights Agreement has been
satisfied or waived, which confirmation will not be unreasonably withheld or
delayed.
(e) Once the aggregate amount of all Net Proceeds equals or
exceeds $2,000,000, the Agent shall deliver any unsold Shares to the Company.
(f) The Agent shall cause the Stockbroker to send to the Company,
within three business days of each transfer, a duplicate confirmation regarding
each sale of the Shares through the Brokerage Account.
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4. Limitations on the Agent's Responsibility.
(a) The Agent acts hereunder as a depository only, and is not
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness or validity of any of the instruments, certificates or other
documents deposited with it hereunder, or the identity, authority, or rights of
any person executing or depositing the same.
(b) The Agent shall not be required to take or be bound by notice
of any default by any person, or to take any action with respect to such default
involving any expense or liability, unless notice in writing is given to Agent
of such default by the undersigned or any of them in accordance with this
Agreement.
(c) The Agent shall not incur any liability in acting upon any
notice, request, waiver, consent, receipt or other paper or document believed by
the Agent to be genuine and to be signed by the proper party or parties.
(d) The Agent may be advised by legal counsel in the event of any
dispute or question concerning Agent's duties hereunder and shall not be held to
any liability for acting in accordance with advice so received. All expenses of
legal counsel incurred by Agent in the performance of his duties hereunder shall
be paid equally by the Company and Investor.
5. Disputes. In the event of any disagreement between the undersigned
or any of them, and/or the person or persons named in the foregoing instruments,
and/or any other person, resulting in adverse claims and demands being made in
connection with or for any papers, money or property involved herein or affected
hereby, the Agent shall be entitled at its option to refuse to comply with any
such claim or demand and with any instructions set forth herein, so long as such
disagreement shall continue, and in so refusing the Agent may refrain from
making any delivery or other disposition of any notices, instruments,
certificates, stock powers or other documents involved herein or affected
hereby, and in so doing the Agent shall not be or become liable to the
undersigned or any of them or to any person or party for its failure or refusal
to comply with such conflicting or adverse demands; and the Agent shall be
entitled to continue so to refrain and refuse so to act until:
(a) The rights of adverse claimants have been finally adjudicated
in a court assuming and having jurisdiction of the parties and the Shares
involved herein or affected hereby; and/or
(b) All differences shall have been settled by agreement and the
Agent shall have been notified thereof in writing signed by all of the persons
interested.
6. Termination of Escrow. The escrow created by this Agreement will
be terminated as follows:
(a) Delivery by the Agent of all instruments, certificates,
documents and payments in accordance with the terms of this Agreement;
(b) Resignation by the Agent upon 30 days' written notice to the
Company and Investor. If the Company and Investor have not notified the
resigning Agent of the mutual designation of a new Agent within 30 days after
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such notice of resignation (or such later effective date of resignation as was
specified in the notice of resignation) then the Agent may petition (by means of
an interpleader or other appropriate method) any court of competent jurisdiction
for instruction with respect to the disposition of remaining Shares or funds in
escrow and Agent may deposit with such court, for holding and disposition in
accordance with the holdings of such court, the Shares and funds then held by
the Agent hereunder.
7. Fees. The Agent shall receive fees for its services in
establishing the escrow as provided herein and performing any and all
obligations of the Agent under this Agreement, or performing any and all acts
deemed necessary or appropriate by Agent in furtherance of this Agreement, in
accordance with the fee schedule attached hereto as Exhibit F. The fees of the
Agent shall be paid equally by the Company and Investor.
8. General Provisions. The following general provisions are integral
parts of this Agreement:
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(b) This Agreement may be executed in several counterparts,
without the requirement that all parties sign each counterpart. Each of such
counterparts shall be an original, but all counterparts together shall
constitute one and the same instrument.
(c) This Agreement, including the exhibits, constitutes the entire
agreement between the parties hereto concerning the subject matter hereof. All
prior and contemporaneous agreements concerning the subject matter hereof are
merged herein.
9. Notices. Any notice which any of the parties hereto is required or
permitted to give to any of the others must be in writing and may be given by
personal delivery or by mailing the same by regular mail, to the party to which
or to whom the notice is directed, at the address of such party as set forth
below, or at such address as the parties may hereafter designate in writing. Any
such notice mailed to such address shall be effective when deposited in the
mail, duly addressed and postage prepaid, notwithstanding failure by the
addressee thereof to receive such mailed notice:
If to the Company: _______________________________
_______________________________
_______________________________
With a copy to: Xxxxxx Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
If to Investor: Diverse Media Group Corp.
0000 Xxxxx 0000 Xxxx
Xxxx Xxxxxx Xxxx, Xxxx 00000
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If to the Agent: Xxxxxx-Xxxxx & Co., Inc.
Attn: Xxxx Xxxxx
000 X. Xxxx Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
[Signature Page Follows Immediately]
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EXECUTED effective as of the day and year first above written.
COMPANY: DIVERSE MEDIA GROUP, INC.,
a Delaware corporation
By:
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Name:
Title:
INVESTOR: DIVERSE MEDIA GROUP CORP.,
a Utah corporation
By:
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Name:
Title:
AGENT: XXXXXX-XXXXX & CO., INC.,
a Utah corporation
By:
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Name:
Title:
[Signature Page to Escrow Agreement]
Exhibit A
Settlement and Release
[Exhibit A]
Exhibit B
Investor Rights Agreement
[Exhibit B]
Exhibit C
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Shares Certificate
No.
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9,000,000
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[Exhibit C]
Exhibit D
144 Sale Notice
To: _______________ ("Agent") and Diverse Media Group, Inc. (the "Company")
Re: Sale of Shares pursuant to Escrow Agreement dated May __, 2007 (the
"Escrow Agreement")
You are hereby instructed to sell _______ Shares of the Common Stock,
$0.001 par value (the "Common Stock"), of the Company pursuant to Rule 144 of
the Securities Act of 1933, as amended (the "Act") for the benefit of the
undersigned. In connection with this instruction, the undersigned notifies you
as follows:
1. The undersigned desires to sell _______ Shares (the "Shares") of
Common Stock.
2. The overall monthly trading volume (the "Monthly Trading Volume") of
the Common Stock of the Company is ______ shares of Common Stock. The Monthly
Trading Volume has been calculated on a week by week basis as the trading volume
reported by ________________ (the "Market"), the principal market or exchange on
which the Common Stock trades for the four trading weeks (Monday through Friday)
immediately preceding the date of this 144 Sale Notice.
3. Attached hereto is copy of the Monthly Trading Volume as reported by
the Market.
4. The number of Shares the undersigned desires to sell is less than
15% of the Monthly Trading Volume.
5. The Shares are being sold during the two-year period following the
date the undersigned acquired the Shares from the Company or an affiliate of the
Company:
[ ] Yes [ ] No
a. If Yes, the undersigned has filed a Rule 144 Notice required by
the Securities Act.
b. If Yes, the undersigned will comply with the volume limitations
and current public information requirements of the Securities Act.
c. If Yes, the undersigned will sell the Shares in a broker's
transaction in compliance with the Securities Act.
[Exhibit D]
6. Upon completion of the sale, direct the proceeds, net of commissions
and fees, to _____________________ at the following address:
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Dated: ____________, 20__
[Investor Name]
By: ____________________
Name:
Title:
Acknowledged and Agreed:
Diverse Media Group, Inc.
By:
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Name:
Title:
[Exhibit D]
Exhibit E
Registered Sale Notice
To: _______________ ("Agent") and Diverse Media Group, Inc. (the "Company")
Re: Sale of Shares pursuant to Escrow Agreement dated May __, 2007 (the
"Escrow Agreement")
You are hereby instructed to sell _______ Shares of the Common Stock,
$0.001 par value (the "Common Stock"), of the Company pursuant to an effective
registration under the Securities Act of 1933, as amended (the "Securities
Act"), for the benefit of the undersigned. In connection with this instruction,
the undersigned notifies you as follows:
1. The undersigned desires to sell _______ Shares (the "Shares") of
Common Stock.
2. The overall monthly trading volume (the "Monthly Trading Volume") of
the Common Stock of the Company is ______ shares of Common Stock. The Monthly
Trading Volume has been calculated on a week by week basis as the trading volume
reported by ________________ (the "Market"), the principal market or exchange on
which the Common Stock trades for the four trading weeks (Monday through Friday)
immediately preceding the date of this Notice.
3. Attached hereto is copy of the Monthly Trading Volume as reported by
the Market.
4. The number of Shares the undersigned desires to sell is less than
15% of the Monthly Trading Volume.
5. The Shares are being sold pursuant to an underwritten distribution:
[ ] Yes [ ] No
a. If Yes, the Agent shall deliver or cause to be delivered
certificates representing the Shares to the following underwriter
for sale in accordance with the Escrow Agreement:
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b. If No, the Agent will cause the Shares to be sold by the
Stockbroker pursuant to the terms of the Escrow Agreement.
[Exhibit E]
6. Upon completion of the sale, direct the proceeds, net of
commissions, underwriting discounts and expenses, and fees, to ________________
at the following address:
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Dated: ____________, 20__
[Investor Name]
By: ____________________
Name:
Title:
Acknowledged and Agreed:
Diverse Media Group, Inc.
By:
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Name:
Title:
[Exhibit E]
Exhibit F
Fee Schedule
In its capacity as Stockbroker, Xxxxxx-Xxxxx & Co., Inc. will charge
its normal and customary fees. Agent will not receive additional fees for its
services as Agent.
[Exhibit F]
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