FORBEARANCE AGREEMENT
 
 
THIS FORBEARANCE AGREEMENT (“Agreement”) is entered into as of March 1, 2012
(the “Effective Date”), by and among Advanced Beauty Solutions, LLC (“ABS”), a
California limited liability company; and CirTran Corporation, a Nevada
Corporation (“Judgment Debtor” or “CIRTRAN”); CirTran Beverage, Corp., a Utah
corporation (“CirTran Beverage”); CirTran Product Corp., a Utah corporation
(“CirTran Products”); CirTran Media Corp., a Utah corporation (“CirTran Media”);
and Iehab Hawatmeh, an individual (“Iehab”) (the Judgment Debtor together with
CirTran Beverage, CirTran Products, CirTran Media, and Iehab are individually
and collectively referred to herein as the “CirTran Parties”).
 
RECITALS
 
 
A. ABS and CIRTRAN entered into a Purchase Agreement dated in or about May 2006
for sale of substantially all of ABS’s assets to CIRTRAN (the “Purchase
Agreement”). The Purchase Agreement was approved on June 7, 2006 by the
Bankruptcy Court of the Central District of California in the Chapter 11
bankruptcy action filed by ABS entitled In re Advanced Beauty Solutions, LLC,
Case No. 1:06-bk-10076-GM (the “Bankruptcy Action”).  Pursuant to the Purchase
Agreement, ABS agreed to sell CIRTRAN the following intellectual property:
 
TRADEMARK REGISTRATIONS
 
Country
Mark
Date Filed
Date Registered
Serial/Registration Number
United States
True Ceramic Pro
4-9-2004
n/a
78/399698
United States
True Ceramic Pro
4-9-2004
7-1-2008
78/979167
International
True Ceramic Pro
10-13-2004
10-13-2004
0861761

 
COPYRIGHT REGISTRATIONS
 
NAME OF WORK
REGISTRATION NO.
REGISTRATION DATE
Advanced Beauty Solutions website
and web pages
TX-6-064-955
10/4/2004
Advanced Beauty Solutions brochure
and literature
TX-6-064-956
10/4/2004
True Ceramic Pro – Live Ops (TCP5)
infomercial and related master tapes
N/A
N/A

 
 

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In exchange, CIRTRAN agreed to: (i) make a cash payment in the amount of
$1,125,000, (ii) reduce its $2,350,000 allowed general unsecured claim in the
Bankruptcy Action by $750,000, leaving Purchaser with an allowed general
unsecured claim in the amount of $1,600,000, (iii) the assumption of the Assumed
Liabilities, and (iv) obligation to pay Seller $3.00 per True Ceramic Pro flat
iron unit (a “Unit”) sold by Purchaser in accordance with Section 2.4(b) of the
Purchase Agreement.
 
B. CIRTRAN delayed making royalty payments and defaulted under its obligations
under the Purchase Agreement. On March 9, 2007, ABS filed a first Complaint
against CIRTRAN. Thereafter, a settlement was reached and CIRTRAN acknowledged
that it owed ABS $130,000 in royalties as of the first quarter of 2007 and
agreed to pay ABS weekly payments of $12,500. Based on said agreement, ABS
dismissed the First Complaint.
 
C. After making several payments under the Purchase Agreement that resulted in
ABS dismissing the first Complaint, CIRTRAN again and for the third time
defaulted under the terms of the Purchase Agreement in December 2007. The third
default caused ABS to file a second Complaint on May 29, 2008 in the action
entitled Advanced Beauty Solutions, LLC v. CirTran Corporation, Adversary Case
No. 1:08-ap-01363-GM (“Adversary Action”).
 
D. On September 8, 2008, the Bankruptcy Clerk entered CIRTRAN’s default in the
Adversary Action. Between October 2008 and December 2008, counsel for ABS and
for CIRTRAN discussed settlement. All communications concerning settlement ended
in December 2008.
 
E. On February 24, 2009, ABS filed a Motion for Default Judgment seeking damages
against CIRTRAN for the breach of the Purchase Agreement in the amount it was
entitled to under the Purchase Agreement, which included $435,000 in minimum
royalties as of June 2008 and additional royalties under a Profit Share
Obligation until the maximum amount of $4.3 million was reached. In order to
calculate the Profit Share Obligation, ABS retained an expert, Richard Nelson,
CPA, CVA, to perform a net present value of the expected stream of royalties.
 
F. On March 17, 2009, judgment was entered in favor of ABS and against CIRTRAN
in the amount of $1,808,233.20 in principal, $643.96 in interest, and $3,444.45
in costs (“Adversary Judgment”).
 
G. On or about July 17, 2009, CIRTRAN moved to set aside the Judgment. The
Bankruptcy Court denied CIRTRAN’s motion to set aside the Judgment pursuant to
an order entered on September 11, 2009. CIRTRAN then appealed the denial of
CIRTRAN motion to set aside the judgment to the California Central District
Court but then abandoned the appeal. On November 17, 2009 the District Court
dismissed the appeal.
 

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H. On March 17, 2010, the Bankruptcy Court issued a Turnover Order in favor of
ABS ordering CIRTRAN to turn over to ABS its Stock and Membership Interest
Certificates. On March 24, 2010, CIRTRAN filed a Motion for Reconsideration,
claiming that the Turnover Order exceeded state law statutory authority and
claiming that CIRTRAN no longer had possession of the stock certificates. On
April 21, 2010, the Bankruptcy Court granted the Motion for Reconsideration in
part and denied it in part, by modifying the Turnover Order to direct turnover
of the stock certificates to a levy officer rather than to ABS, and denying the
request to reconsider the granting of the Turnover Motion.
 
I. On June 15, 2010, ABS filed an Application for an Assignment Order and
Charging Order and related requests to satisfy the Judgment. In the Application,
ABS sought an assignment of the original copyrights, trademarks and patents that
ABS sold to CIRTRAN. CIRTRAN opposed the application on June 23, 2010 claiming
that YA Global Investment L.P. (“YA Global”) had perfected security interests in
all CIRTRAN’s assets (the “Senior Liens”). On August 13, 2010, the Court granted
the Assignment Application in part and denied it in part, and ordered the
assignment of the original copyright registrations but not the assignment of
CIRTRAN’s trademarks or patent rights (the “First Assignment Order”). The First
Assignment Order also enjoined CIRTRAN from disposing of certain payments from
each of its subsidiaries. On September 22, 2010, the Court entered a second
Assignment Order (“Second Assignment Order”). In the Second Assignment Order the
Bankruptcy Court assigned to ABS CIRTRAN’s interest in payments from all its
named subsidiaries including CirTran Products, CirTran Beverage, and CirTran
Products. On October 12, 2010, Iehab Hawatmeh, as representative of CirTran,
CirTran Beverage, CirTran Media and CirTran Products was personally served with
the Assignment Order.
 
J. On February 22, 2011, CIRTRAN filed a Motion to Declare the Adversary
Judgment Fully Satisfied or to Alternatively to Recoup Mutual Debts (Adversary
Action Docket Nos. 121-126) (the “Satisfaction Motion”). ABS opposed the
Satisfaction Motion.
 
K. On or about March 3, 2011, ABS filed a Motion for issuance of an Order to
Show Cause re: Contempt of CIRTRAN, CirTran Beverage, CirTran Products, CirTran
Media and Iehab Hawatmeh. The motion sought civil penalties and damages
resulting from the respective parties’ violation of the First and Second
Assignment Orders based on certain bank records purportedly establishing that
transfers of over $150,000 should have been turned over to ABS pursuant to the
two assignment orders. The CirTran Parties and YA Global, CIRTRAN’s secured
lender, opposed the Motion for an OSC re: Contempt.
 
L. On April 13, 2011, the Bankruptcy Court issued an Order to Show Cause Re:
Civil Contempt by CIRTRAN, CirTran Beverage, CirTran Products, CirTran Media and
Iehab Hawatmeh (“OSC re: Contempt”) (Adversary Action docket No. 147). The Court
calendared an evidentiary hearing on the OSC re: Contempt to July 8, 2011. The
Bankruptcy Court has continued the OSC re: Contempt several times and it is
currently calendared to October 27, 2011.
 

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M. On April 28, 2011, the Bankruptcy Court entered an order denying CIRTRAN’s
Satisfaction Motion and finding ABS to be the prevailing party on the motion.
 
N. Previously, on or about April 20, 2011, CIRTRAN appealed the Court’s
tentative ruling denying CIRTRAN’s Satisfaction Motion initiating the matter
entitled Advanced Beauty Solutions, LLC v. CirTran Corporation, in the
Bankruptcy Appellate Panel (“BAP”) of the Ninth Circuit Court of Appeal, BAP
No.: CC-11-1183 (the “BAP Appeal”). ABS and CIRTRAN have filed their respective
appellate briefs and the BAP calendared a hearing on the BAP Appeal on November
16, 2011 at 9:00 a.m.
 
O. On or about May 13, 2011, ABS filed a Motion for Attorneys’ Fees as the
prevailing party on the Satisfaction Motion. On July 11, 2011 the Bankruptcy
Court granted the Motion for Attorneys’ Fees in part and awarded ABS $35,450.50
in attorneys’ fees incurred in ABS’s successful defense against CIRTRAN’s
Satisfaction Motion (“Attorneys’ Fee Judgment,” together with the Adversary
Judgment, are collectively referred to herein as the “Judgments”). On July 22,
2011, YA Global filed a Motion for Entry of an Order Clarifying and Staying
Enforcement of the Court’s Attorney Fee Judgment. On August 29, 2011, the
Bankruptcy Court entered an order on YA Global’s Motion ordering ABS’s counsel
to deposit and hold any funds in its trust account which were provided by
CIRTRAN in payment of the Attorney Fee Judgment, and to not disburse any such
until December 1, 2011 or after. The August 29, 2011 order further set a due
date of December 1, 2011 for YA Global to conduct a foreclosure sale of its
secured collateral under its financing arrangements with CIRTRAN or ABS would be
authorized to disburse the funds pursuant to its Chapter 11 Plan of Liquidation,
confirmed by the Bankruptcy Court on November 7, 2006. The order further
provided that if such foreclosure sale was completed, that YA Global would
retain its rights to seek turnover of such funds from ABS under YA Global’s
financing arrangements with CIRTRAN, and in accordance with the Uniform
Commercial Code and other applicable law.  By letter agreement dated October 18,
2011, the disposition of the Collateral scheduled for October 19, 2011, was
continued, subject to agreed terms and conditions.  As of the date of this
Agreement, YA Global has not sold the Collateral.
 
P. On or about September 21, 2011, CIRTRAN’s counsel David Tufts of Durham Jones
& Pinegar applied to the Bankruptcy Court to withdraw from representation of
CIRTRAN. On October 6, 2011 the Bankruptcy Court entered an order granting the
withdrawal of CIRTRAN’s counsel.
 
Q. CIRTRAN has failed to make any voluntary payments on the Adversary Judgment
and the Attorneys’ Fees Judgment. CIRTRAN acknowledges that ABS has not waived
any of its rights with respect to enforcement of the Adversary Judgment and the
Attorneys’ Fees Judgment, and that ABS has not extended, and has no duty to
extend, the time for any payment under the respective Judgments.
 

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R. The CirTran Parties have requested that ABS forbear from exercising its
remedies under the Judgments. Although ABS is under no obligation to do so, ABS
is willing to forbear from exercising such remedies for the period set forth
herein, provided that the CirTran Parties comply with the terms hereof and that
the conditions set forth herein are met within the time periods required in this
Agreement.
 
S. On November 7, 2006, the Bankruptcy Court in the Bankruptcy Action entered an
order confirming the Debtor’s first amended liquidating Chapter 11 plan
“Confirmation Order.”  The Confirmation Order states in relevant part at Page 2,
lines 12 through 16 as follows:
 
IT IS ORDERED that the right to litigate, resolve, and settle any claims of the
Estate, including but not limited to, Avoidance Actions, Post-Confirmation
Estate Claims and/or objections to claims against the Estate, whether or not the
subject of litigation as of the Effective Date, shall be vested solely in the
Reorganized Debtor as of the Effective Date, without the necessity of further
Court order, and all such actions shall be deemed to be duly authorized.
 
The liquidating plan, a copy which is attached to the Confirmation Order,
further provides in relevant part on page 30, line 18 of the plan as follow:
 
The right to enforce, litigate, collect, and settle, on behalf of the Estate (at
the expense of the Estate), any and all Claims and causes of action which
constitute property of the Estate including, but not limited to, any Avoidance
Actions, whether or not such Claims or causes of action are the subject of
litigation pending as of the Effective Date (collectively, the "Post
Confirmation Estate Claims"), shall be vested solely in the Disbursing Agent as
of the Effective Date. From and after the Effective Date, the Disbursing Agent
shall have the sale right to enforce, file, prosecute, collect, or settle, any
Post-Confirmation Estate Claims.
 
NOW THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, ABS
and CirTran Parties hereby agree as follows:
 
1. Incorporation of Recitals. Each of the above Recitals is represented to be
true and correct and deemed to be the agreement of ABS and the CirTran Parties.
 

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2. Confirmation of Judgment; No Waiver.
 
a.  
The CirTran Parties hereby acknowledge that the Judgments, except to the extent
of any issue now pending before the BAP in the BAP Appeal and proceedings
pursuant thereto, are valid and enforceable obligations against CIRTRAN, due and
payable in full without defense, set off or counterclaim of any kind. ABS’s
entry into this Agreement, acceptance of interest or principal payments,
negotiations with the CirTran Parties, or any creditor of CIRTRAN, obtaining an
appraisal or conducting other analysis or investigation of the collateral for
the Agreement, or any other action or failure to act on the part of ABS shall
not constitute a renewal, extension or modification of the Adversary Judgment
and the Attorneys’ Fees Judgment or a waiver of ABS’s rights or remedies in
connection thereto.

 
b.  
ABS acknowledges that CIRTRAN’s entry into this Agreement; payment of interest,
principal, or other amounts; negotiations, communications, or course of dealing
with ABS; or any other act or failure to act of CIRTRAN shall not constitute a
renewal, extension, or modification of the Judgments or a waiver of CIRTRAN’s
rights in connection therewith.

 
3. Execution; Forms of Agreements; Conditions Precedent.  Contemporaneous with
the execution of this Agreement and the delivery thereof to ABS:
 
a.  
The CirTran Parties shall tender to ABS Twenty-Five Thousand Dollars ($25,000),
which ABS shall apply towards a reduction of the total amounts owed under the
Judgments, and all payments received from the CirTran Parties will be used to
first reduce the Attorneys’ Fees Judgment until it is satisfied;

 
b.  
CIRTRAN shall execute and tender to ABS a stipulation to an additional judgment
in the form of the stipulated judgment attached hereto as Exhibit A for all
attorney fees incurred by ABS in negotiating the Forbearance Agreement to
resolve the Adversary Judgment and the Attorneys’ Fee Judgment (the “Stipulation
for Judgment”). The additional stipulated judgment shall be filed only after an
uncured default of this Agreement by the CirTran Parties.

 
c.  
CIRTRAN shall execute and tender to ABS a Pledge and Security Agreement in the
form attached hereto as Exhibit B (“Pledge and Security Agreement”) which Pledge
and Security Agreement shall secure the Agreement and shall constitute a lien in
favor of ABS on all of the assets of CIRTRAN (the “Junior Lien”), including
CIRTRAN’s equity interest in its subsidiaries and various
entities.  Concurrently with the execution of the Pledge and Security Agreement,
ABS shall enter into a Subordination Agreement with YA Global subordinating the
Junior Liens to the Senior Liens (“YA Subordination Agreement”);

 

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d.  
CIRTRAN shall execute and tender to ABS a Trademark Assignment in the form
attached hereto as Exhibit C whereby CIRTRAN shall assign the True Ceramic Pro
Trademarks, U.S. Registration Nos. 78/979167, 78/399698 and International
Registration No. 0861761 to ABS (the “Trademark Agreement”);

 
e.  
CIRTRAN shall execute and tender to ABS a Claim Assignment in the form attached
hereto as Exhibit D wherein CIRTRAN shall assign its creditor claim against the
estate of ABS to ABS to the extent of the balance due under this Agreement,
after adjustment for the value of the intellectual property assigned previously
or as provided above (the “Claim Assignment Agreement”). Any distribution on
such creditor claim in excess of the permitted amounts due to ABS pursuant to
this Agreement shall be paid to CIRTRAN;

 
f.  
Within five business days after the execution of this Agreement, CIRTRAN shall
deliver to ABS details of all prior use of the trademark and copyrights, which
will include a report showing where the copyrighted infomercial has been
displayed and sales volume, by month, of True Ceramic Pro products from June 7,
2006, the date of entry of the order approving the original purchase agreement
for the sale to CIRTRAN of the intellectual property assets of ABS, to the
Effective Date, the date of the return of the intellectual property assets to
ABS from CIRTRAN.  Such data will be provided for information purposes
only.  All claims of ABS related to payments for the sales of the trademarked
goods under the Purchase Agreement have been fully and finally resolved in the
Adversary Action, and no further cause of action, claim for relief, or other
remedy will be based thereon. For avoidance of doubt, nothing herein limits,
modifies or restricts the full and complete release set forth in Section 9 of
this Agreement;

 
g.  
ABS and YA Global shall execute a subordination agreement in the form attached
hereto as Exhibit E, wherein ABS shall subordinate its security interests in all
of the assets of CIRTRAN (created by the Pledge and Security Agreement described
in Section 3(d) above) in favor of the security interests held by YA Global over
the same assets.

 
4. Forbearance; Conditions.  During the period (“Forbearance Period”) commencing
on the Effective Date of this Agreement and continuing until the earlier of
January 30, 2016 (the “Forbearance Deadline”), or the occurrence of an Event of
Default under Section 7 below or the occurrence of the conveyance, transfer, or
the sale of the Senior Obligation of YA Global to the CirTran Parties or to any
party directly or indirectly owned or controlled by the CirTran Parties, or
which is acquiring the Senior Liens in active participation with the CirTran
Parties while the CirTran Parties are in default of payment to ABS as set forth
herein in paragraph 4(f), ABS agrees to forbear from exercising any judgment
enforcement remedies against the CirTran Parties, provided that all of the
following conditions are satisfied during the Forbearance Period. The failure to
observe any ongoing condition shall constitute a default under this Agreement.
 

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a.  
CIRTRAN will pay ABS, in full satisfaction of the Adversary Judgment and the
Attorneys’ Fees Judgment, a total principal amount of One Million Eight Hundred
Ten Thousand Dollars ($1,810,000.00) (the “Settlement Amount”) ($1,835,000 less
the $25,000 paid at closing), subject to adjustment as provided in Section 4(c)
below. CIRTRAN, CirTran Beverage, CirTran Products, and CirTran Media shall only
be jointly and severally liable to pay ABS the first $150,840 of the Settlement
Amount in resolution of the pending OSC re: contempt for the transfer $150,840
in violation of the Court’s order; only CIRTRAN shall be liable to pay ABS the
amounts in excess of $150,840.  The Settlement Amount shall be payable as
follows: (i) CIRTRAN and, to the extent of the initial $150,840, CirTran
Beverage, CirTran Products, and CirTran Media shall pay ABS $7,500 per month for
46 consecutive months, commencing on March 29, 2012, and continuing on the last
day of each month until January 30, 2016, except that in December 2012 CirTran
shall pay $15,000 rather than $7,500, and (ii) thereafter, the entire unpaid
balance of the Settlement Amount, as finally determined as provided below, shall
be due and payable on January 30, 2016.  If any payment date falls on a weekend
or legal holiday in the State of California, the payment will be due on the next
succeeding business day.

 
b.  
During the Forbearance Period, interest on the Settlement Amount will not accrue
if all payments provided herein are timely made. If the CirTran Parties default
on their payment obligation under this  Agreement, default interest at the rate
of 10% per annum will immediately accrue, which will be calculated from the
Effective Date.

 
c.  
The Settlement Amount due under this Agreement shall be reduced by (a) the
greater of (i) the amount of credit granted by either the BAP or the Bankruptcy
Court to CIRTRAN for the value of the intellectual property previously conveyed
to ABS and to be conveyed pursuant to Exhibit C; and (ii) the amount received by
ABS for sale of such intellectual property to a third party during the term of
this Agreement, whether in a single or series of transactions, provided that if
ABS sells less than all of such intellectual property, the value of the portion
retained shall be determined by agreement of the parties or, in the absence of
agreement, by the Bankruptcy Court; and (b) any distribution to which CIRTRAN
would be entitled as a creditor of ABS but for the assignment by CIRTRAN of such
creditor claim by the execution and delivery of the Claim Assignment Agreement
in the form of Exhibit D. Notwithstanding the foregoing, the Settlement Amount
shall never be reduced below $90,000, which shall be payable to ABS during the
first 12 months under this Agreement pursuant to Section 4(a) above. Any
principal reduction resulting from (a) or (b) above will be applied to the final
payment due on January 30, 2016 first, followed by the application to all other
payments due under this Agreement in reverse order of maturity.

 

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d.  
The BAP Appeal shall continue to determine, either in such appeal or on remand
as the BAP may determine, the amount of credit due CIRTRAN for the conveyance of
the copyright intellectual property prior to the Effective Date of this
Agreement at issue in the Satisfaction Motion and the amount of credit due
CIRTRAN for the conveyance of the trademark intellectual property on the
Effective Date of this Agreement. The Parties will agree that the determination
of any issue decided by the BAP will be conclusive, and no appeal may be had
from such ruling. If the BAP fails to determine the value of the copyrights
assigned to ABS or remand the issue to the Bankruptcy Court, the Parties will
agree to submit to a judicial determination of the value of all the intellectual
property transferred from CIRTRAN to ABS before the Bankruptcy Court. The
determination by the Bankruptcy Court of the fair market value of the
intellectual property on the date of transfer will be conclusive in the absence
of manifest error, and no appeal to such determination will be allowed. Any
attorney fees awarded by the court in the BAP Appeal to CirTran shall be added
to increase the amount determined by the court to be credited against the
Adversary Judgment. Any such fees awarded by the court in the BAP Appeal to ABS
shall be added to the balance payable under this Agreement at maturity.

 
e.  
Except for the BAP Appeal and the judicial determination of the fair market
value of the intellectual property assets transferred by CIRTRAN to ABS, all
litigation and disputes between ABS and its affiliates on the one hand and
CIRTRAN and its affiliates on the other, including the pending OSC Re: Contempt
proceeding against the CirTran Parties and all other claims, known or unknown
and whether or not previously asserted, shall be dismissed, and the foregoing
parties have exchanged mutual general releases herein, excepting only
obligations arising under the Agreement and the related Pledge and Security
Agreement, Assignment Agreement and the BAP Appeal, including any additional
attorney fees incurred in prosecuting the BAP Appeal as further provided
below.  ABS shall cause the dismissal of the OSC re: Contempt within thirty (30)
days following execution of the Agreement.

 
f.  
If the CirTran Parties are in payment default of their payment obligations to
ABS under this Agreement, and if YA Global sells, assigns, conveys, or otherwise
transfers its Senior Liens to the CirTran Parties, or to any party directly or
indirectly owned or controlled by the CirTran Parties, or which is acquiring the
Senior Liens in active participation with the CirTran Parties, without requiring
such party to first cure the payment defaults under this Agreement, then ABS
shall have the right, but not the obligation, to immediately terminate the
standstill and/or forbearance provisions set forth in Section 1 of the YA
Subordination Agreement and Section 4 of this Agreement and ABS shall be
entitled to take all appropriate action to accelerate, demand, collect, or
enforce payment of the Settlement Amount, the Adversary Judgment and the
Attorney Fee Judgment.  The termination of the standstill/forbearance provisions
of Section 4 of this Agreement and Section 1 of the YA Subordination Agreement
shall not affect, modify, or alter the other provisions of this Agreement or the
YA Subordination Agreement, including, without limitation, the priority of the
YA Senior Liens over the Junior Liens and YA Global’s rights in connection with
the same, all as set forth in this Agreement. For the avoidance of doubt, an
assignment of all or part of the YA Global Senior Liens shall not give ABS any
right to terminate the standstill/forbearance provisions of Section 4 of this
Agreement and Section 1 of the YA Subordination Agreement, and such provisions
will remain in full force and effect, if such assignment is (a) to a subsidiary
or affiliate of YA Global or an existing investor in YA Global (determined as of
the date hereof), (b) to any party other than the CirTran Parties, or a party
directly or indirectly owned or controlled by the CirTran Parties, or who is
acquiring the Senior Liens in active participation with the CirTran Parties, or
(c) made at a time when there is then no existing payment default under this
Agreement.

 
 

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5. Bankruptcy Court Approval; Perfection of ABS Security Interest.  Promptly
following receipt of the executed Pledge Agreement, ABS shall be free to file in
the appropriate public office a financing statement perfecting its security
interest under the Security Agreement.  ABS represents and warrants that it has
the right to litigate, resolve, and settle any claims of its bankruptcy Estate,
including but not limited to, Post-Confirmation Estate Claims; and that such
claims are vested solely in it as of November 6, 2007, without the necessity of
further Court order, and that its settlement with CirTran as set forth in this
Agreement is duly authorized.  It is expressly understood that if Bankruptcy
Court approval of this Agreement becomes manifest or is manifest, that (1) ABS
shall seek approval of this Agreement in the Bankruptcy Court and provide notice
to CirTran of the grounds for the requirement for bankruptcy approval, and (2)
this Agreement, the Pledge and Security Agreement, the Trademark Agreement, the
Claim Assignment Agreement, and the Stipulation for Judgment shall become void
only upon the failure by ABS to receive Bankruptcy Court approval of the
Agreement within forty-five days after written notice of the grounds for the
requirement of Bankruptcy Court approval is provided to ABS by either CirTran or
YA Global or YA Global’s assignee.
 
6. CirTran Parties Covenants. During the Forbearance Period, the CirTran Parties
will do all of the following:
 
a.  
make timely payments to ABS for all amounts due pursuant to this Agreement to
the extent of their obligations as set forth in section 4.a.; and

 
b.  
comply with all other requirements of this Agreement.

 

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7. Events of Default. The occurrence of any of the following events of default
(an “Event of Default”) shall be an Event of Default and, if the CirTran Parties
do not cure the Event of Default within ten (10) days after issuance of a
written notice pursuant to Section 10 k of this Agreement by ABS or its
authorized agent that the default be cured, at the option of ABS, ABS shall
terminate the forbearance and make all obligations of the CirTran Parties
immediately due and payable, all without further demand, presentment or notice,
all of which requirements the CirTran Parties hereby waives:
 
a.  
any failure to make a timely payment in accordance with the terms of this
Agreement; or

 
b.  
any failure by the CirTran parties to perform or satisfy any of the covenants
and conditions of the Agreement or the failure by the CirTran Parties to perform
any of the other obligations set forth in this Agreement.

 
8. Remedies. Upon the occurrence of an uncured Event of Default and at all times
thereafter, ABS, without the necessity of obtaining any prior approval of any
court, shall be entitled to exercise in respect of any collateral it may hold
all rights and remedies of a secured creditor available to it under applicable
laws, and ABS shall also be entitled to exercise all rights and remedies
available to ABS as a creditor generally, including without limitation all
remedies available to ABS under the Adversary Judgment and Attorneys’ Fee
Judgment, as well as rights and remedies available to ABS at law or in equity,
all subject to the terms, covenants, and conditions of the Subordination
Agreement. All such rights and remedies shall be cumulative. No failure or delay
on the part of ABS in exercising any power, right or remedy under the Adversary
Judgment and Attorneys Fee Judgment shall operate as a waiver thereof, and no
single or partial exercise of any such power, right or remedy shall preclude any
further exercise thereof or the exercise of any other power, right or remedy.
 
9. Release.  The CirTran Parties for themselves and their executors,
administrators, general partners, limited partners, employees, representatives,
shareholders, predecessors, subsidiaries and/or affiliates, parents, heirs,
trustees, trustors, beneficiaries, successors-in-interest, transferees, assigns,
officers, directors, managers, members, servants, employees, insurers,
underwriters, successors, attorneys, and agents and each of them, now and in the
future, and all persons acting by, through, under or in concert with them, and
each of them, hereby release and discharge ABS and its past, present and future
administrators, affiliates, agents, assigns, participants, attorneys, directors,
employees, executors, heirs, officers, parents, partners, predecessors,
representatives, servicers, shareholders, subsidiaries and successors, and each
of them, and each of their respective administrators, affiliates, agents,
assigns, participants, attorneys, directors, employees, executors, heirs,
officers, parents, partners, predecessors, representatives, shareholders,
subsidiaries and successors, and each of them, and all persons acting by,
through, under or in concert with ABS, from any and all claims, disputes,
demands, damages, debts, liabilities, obligations, expenses, liens, contracts,
agreements, causes of action, suits, matters, controversies, claims for
attorneys’ fees, costs, incidental expenses, increased overhead, emotional
distress damages, consequential damages, punitive damages, and interest existing
on or at any time prior to the Effective Date of this Agreement by all parties
hereto, of whatever nature, character, or description, whether in law, in
equity, or otherwise, whether known or unknown, asserted or unasserted, fixed,
liquidated or contingent, anticipated or unanticipated, known or unknown,
suspected or unsuspected, that it may have or claim to have against any and all
of them, for or because of any matter or thing done, omitted, or suffered to be
done by any of the other parties prior to and including the Effective Date
arising from, out of, or in any way connected with all agreements, business,
transactions, prior negotiations, courses of dealing, representations,
expectations, agreements, arrangements, or transactions between the parties,
including any matter or thing done, omitted, or suffered to be done or statement
or omission by any party, including any matter arising out of, related to or in
any way connected to any judgment enforcement related to the Adversary Judgment
and the Attorney Fees Judgment, excepting only the obligations arising under
this Agreement and the related Pledge and Security Agreement, Assignment
Agreement, Subordination Agreement and the BAP Appeal, including any additional
attorney fees incurred in prosecuting the BAP Appeal as awarded by the court.
 

Forbearance Agreement ABS (Final).doc  11  

 
 
 

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ABS for itself and its executors, administrators, general partners, limited
partners, employees, representatives, shareholders, predecessors, subsidiaries
and/or affiliates, parents, heirs, trustees, trustors, beneficiaries,
successors-in-interest, transferees, assigns, officers, directors, managers,
members, servants, employees, insurers, underwriters, successors, attorneys, and
agents and each of them, now and in the future, and all persons acting by,
through, under or in concert with them, and each of them, hereby release and
discharge the CirTran Parties and their past, present and future administrators,
affiliates, agents, assigns, participants, attorneys, directors, employees,
executors, heirs, officers, parents, partners, predecessors, representatives,
servicers, shareholders, subsidiaries and successors, and each of them, and each
of their respective administrators, affiliates, agents, assigns, participants,
attorneys, directors, employees, executors, heirs, officers, parents, partners,
predecessors, representatives, shareholders, subsidiaries and successors, and
each of them, and all persons acting by, through, under or in concert with the
CirTran Parties, from any and all claims, disputes, demands, damages, debts,
liabilities, obligations, expenses, liens, contracts, agreements, causes of
action, suits, matters, controversies, claims for attorneys’ fees, costs,
incidental expenses, increased overhead, emotional distress damages,
consequential damages, punitive damages, and interest existing on, or at any
time prior to the Effective Date of this Agreement by all parties hereto, of
whatever nature, character or description, whether in law, in equity or
otherwise, whether known or unknown, asserted or unasserted, fixed, liquidated
or contingent, anticipated or unanticipated, known or unknown, suspected or
unsuspected, that it may have or claim to have against any and all of them, for
or because of any matter or thing done, omitted, or suffered to be done by any
of the other parties prior to and including the Effective Date arising from, out
of, or in any way connected with all agreements, business, transactions, prior
negotiations, courses of dealing, representations, expectations, agreements,
arrangements, or transactions between the parties, including any matter or thing
done, omitted, or suffered to be done  or statement or omission by any party,
including any matter arising out of, related to or in any way connected to any
judgment enforcement related to the Adversary Judgment and the Attorney Fees
Judgment, excepting only the obligations arising under the Agreement and the
related Pledge and Security Agreement, Assignment Agreement, Subordination
Agreement and the BAP Appeal, including any additional attorney fees incurred in
prosecuting the BAP Appeal as awarded by the court.
 

Forbearance Agreement ABS (Final).doc  12  

 
 
 

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ABS and the CirTran Parties acknowledge that they are familiar with Section 1542
of the Civil Code of the State of California 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.
 
ABS and the CirTran Parties waive and relinquish any right or benefit which they
have or may have under Section 1542 of the Civil Code of the State of California
or any similar provision of the statutory or non-statutory law of any other
jurisdiction, to the full extent that it may lawfully waive all such rights and
benefits. In connection with such waiver and relinquishment, ABS and the CirTran
Parties acknowledge that it is aware that it or its attorneys or agents may
hereafter discover facts in addition to or different from those which it now
knows or believes to exist with respect to the subject matter of the foregoing
release or with respect to ABS and the CirTran Parties, but that ABS and the
CirTran Parties intend hereby fully, finally and forever to release all of the
claims, known or unknown, suspected or unsuspected, which now exist or may exist
hereafter by ABS and the CirTran Parties against each other, except as otherwise
expressly provided in the foregoing release. This release shall be and remain in
effect notwithstanding the discovery or existence of any such additional or
different fact.
 
10. Miscellaneous.
 
a.  
Agreement to Cooperate. All the parties hereto agree to and will cooperate fully
with each other in the performance of this Agreement, including without
limitation executing any additional documents reasonably necessary to the full
performance of this Agreement.

 
b.  
Limitation on Relationship. This Agreement shall not be deemed or construed to
create a partnership, tenancy in common, joint tenancy, joint venture,
co-ownership or any other relationship aside from a debtor-creditor relationship
between ABS or any of the CirTran Parties on the one hand and ABS on the other
hand.

 
c.  
Integration. This Agreement incorporates all negotiations of the parties hereto
and is the final expression and agreement of the parties hereto with respect to
the subject matter hereof.

 

Forbearance Agreement ABS (Final).doc  13  

 
 
 

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d.  
Severability. If any provision of this Agreement is held illegal or
unenforceable in a judicial proceeding, such provision shall be severed and
shall be inoperative, and, provided that the fundamental terms and conditions of
this Agreement (including, without limitation, the exhibits executed and
delivered pursuant to Section 3, Section 4 Forbearance Agreement and the related
Subordination Agreement, Section 5 Bankruptcy Court Approval; Perfection of ABS
Security Interest, Section 7 Events of Default and Section 9 Release remain
legal and enforceable, the remainder of this Agreement shall remain operative
and binding on the Parties.

 
e.  
Reversal of Payments. If ABS receives any payments or proceeds of collateral
which are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be paid to a trustee, debtor-in-possession, receiver,
subordinate lender, stop notice claimant, lienholder, or any other party under
any bankruptcy law, common law, equitable cause or otherwise, then, to such
extent, the obligations or part thereof intended to be satisfied by such
payments or proceeds shall be reserved and continue as if such payments or
proceeds had not been received by ABS.

 
f.  
Modification. This Agreement may not be amended, waived or modified in any
manner without the written consent of the party against whom the amendment,
waiver or modification is sought to be enforced.

 
g.  
Reimbursement. Without limiting CIRTRAN’s obligations under the Adversary
Judgment and Attorneys Fee Judgment, the CirTran Parties agrees to reimburse ABS
for all costs and expenses, including without limitation reasonable attorneys’
fees, expended or incurred by ABS in connection with (i) the amendment and
enforcement of this Agreement, including without limitation during any workout,
attempted workout, and/or in connection with the rendering of legal advice as to
ABS’s rights, remedies and obligations under this Agreement, (ii) collecting any
sum which becomes due ABS under this Agreement, (iii) any proceeding for
declaratory relief, any counterclaim to any proceeding, or any appeal, (iv) the
protection, preservation or enforcement of any rights or remedies of ABS or any
of ABS’s collateral for the Agreement, or (v) appraisals, title reports, title
or other insurance, or investigation or analysis of or relating to the
collateral for the Agreement.

 
h.  
Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.

 
i.  
Section Headings. The various headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.

 

Forbearance Agreement ABS (Final).doc  14  

 
 
 

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j.  
Counterparts. This Agreement may be executed in any number of counterparts
which, when taken together, shall constitute but one agreement.

 
k.  
Notices. All notices, consents, approvals or other instruments required or
permitted to be given by either party pursuant to this Agreement shall be in
writing and given by (i) hand delivery, or (ii) express overnight delivery
service and shall be deemed to have been delivered upon (a) receipt, if hand
delivered, (b) the next business day following the date of deposit with the
delivery service, if delivered by express overnight delivery service. Notices
shall be provided to the parties and addresses specified below or to such other
address as the CirTran Parties  or ABS, as the case may be, shall in like manner
designate in writing:

 
To the CirTran Parties:

Attn: Iehab Hawatmeh
4125 S. 6000 W.
West Valley City, Utah 84128
 
To ABS:

Leonard Shulman
8105 Irvine Center Drive, Suite 600
Irvine, California 92618
 
l.  
Authorization. The individual executing this Agreement on behalf of the CirTran
Parties represents and warrants that he has full corporate power and authority
to execute this Agreement and to create binding obligations of the CirTran
Parties enforceable in accordance with the terms hereof.

 
m.  
Legal Counsel Representation. The CirTran Parties represent that they have been
provided an opportunity to seek legal representation in connection with this
Agreement.

 

Forbearance Agreement ABS (Final).doc  15  

 
 
 

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IN WITNESS WHEREOF, ABS and the CirTran Parties have executed this Agreement as
of the date set forth in the preamble.
 
JUDGMENT CREDITOR:
 
Advanced Beauty Solutions, LLC, a California limited liability company
 
By: /s/ Jason Dodo
Name: Jason Dodo
Title: Manager
 
CIRTRAN PARTIES:
 
CirTran Corporation, a Nevada corporation
 
By: /s/ Iehab Hawatmeh
Name: Iehab Hawatmeh
Title: Chief Executive Officer
 
CirTran Beverage Corp., a Utah corporation
 
By: /s/ Iehab Hawatmeh
Name: Iehab Hawatmeh
Title: Chief Executive Officer
 
CirTran Products Corp., a Utah corporation
 
By: /s/ Iehab Hawatmeh
Name: Iehab Hawatmeh
Title: Chief Executive Officer
 
CirTran Media Corp., a Utah corporation
 
By: /s/ Iehab Hawatmeh
Name: Iehab Hawatmeh
 
/s/ Iehab Hawatmeh
Iehab Hawatmeh, an individual
 

Forbearance Agreement ABS (Final).doc  16  

 
 
 

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CONDITIONAL GUARANTY

Iehab Hawatmeh hereby unconditionally, absolutely, and irrevocably guarantees to
ABS the full payment of the first $150,840 of the amount owing by CIRTRAN to ABS
under the foregoing Forbearance Agreement, provided, however, that the right of
ABS to enforce this guaranty shall be conditioned upon the occurrence, while
Hawatmeh is an officer or director of the any of the CirTran Parties, of fraud,
intentional misrepresentation or material omission, and/or willful misconduct on
the part of any of the CirTran Parties and/or Hawatmeh, including, without
limitation, misrepresentations, acts or omissions in connection with this
guaranty or the Forbearance Agreement, or any of the transactions evidenced
thereby or related thereto (it being acknowledged and agreed that mere
nonpayment or simple covenant defaults under such Forbearance Agreement, shall
not on their own constitute willful misconduct). The guaranty set forth herein
shall automatically terminate upon the payment of $150,840 under such
Forbearance Agreement.

 
/s/ Iehab Hawatmeh
Iehab Hawatmeh, an individual
 

Forbearance Agreement ABS (Final).doc  17  

 
 
 

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Exhibit A
 
 
 
 
 
A-1
 
 

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James C. Bastian, Jr. – Bar No. 175415
Samuel J. Romero – Bar No. 232824
SHULMAN HODGES & BASTIAN LLP
8105 Irvine Center Drive, Suite 600
Irvine, California  92618
Telephone: (949) 340-3400
Facsimile: (949) 340-3000

General Counsel for the Reorganized Debtor
Advanced Beauty Solutions, LLC, a California limited liability company
 
UNITED STATES BANKRUPTCY COURT
 
 
CENTRAL DISTRICT OF CALIFORNIA, SAN FERNANDO VALLEY DIVISION
 
 
 

In re   Case No.  1:06-bk-10076 GM       ADVANCED BEAUTY SOLUTIONS, LLC, a
California limited liability company,   Chapter 11   Debtor.   Adv.
No.  1:08-ap-01363-GM       ADVANCED BEAUTY SOLUTIONS, LLC, a California limited
liability company,   STIPULATION FOR ENTRY OF JUDGMENT BETWEEN ADVANCED BEAUTY
SOLUTIONS, LLC AND CIRTRAN CORPORATION   Plaintiff,           v.          
CIRTRAN CORPORATION., a Nevada Corporation,      Defendant.    

 
 
TO THE HONORABLE GERALDINE MUND, UNITED STATES BANKRUPTCY JUDGE, AND ALL OTHER
INTERESTED PARTIES AND THEIR COUNSEL OF RECORD:
 
Reorganized Debtor Advanced Beauty Solutions, LLC (“ABS”) and CirTran
Corporation (“CirTran”), by and through their respective counsel, hereby agree
and stipulate based on the following recitals:
 
1
STIPULATION FOR ENTRY OF JUDGMENT
 
A-2
 
 

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I.  RECITALS
 
A.           ABS and CirTran entered into a Purchase Agreement dated in or about
May 2006 for sale of substantially all of ABS’s assets to CirTran.  The Purchase
Agreement was approved on June 7, 2006 by the Bankruptcy Court of the Central
District of California in the Chapter 11 bankruptcy action filed by ABS entitled
In re Advanced Beauty Solutions, LLC, Case No. 1:06-bk-10076-GM (the “Bankruptcy
Action”).  Pursuant to the Purchase Agreement, ABS agreed to sell CirTran the
following intellectual property:
 
TRADEMARK REGISTRATIONS
 
Country
Mark
Date Filed
Date Registered
Serial/Registration Number
United States
True Ceramic Pro
4-9-2004
n/a
78/399698
International
True Ceramic Pro
10-13-2004
10-13-2004
0861761

COPYRIGHT REGISTRATIONS
 
NAME OF WORK
REGISTRATION NO.
REGISTRATION DATE
Advanced Beauty Solutions website and web pages
TX-6-064-955
10/4/2004
Advanced Beauty Solutions brochure and literature
TX-6-064-956
10/4/2004
True Ceramic Pro – Live Ops (TCP5) infomercial and related master tapes
N/A
N/A

In exchange, CirTran agreed to: (i) make a cash payment in the amount of
$1,125,000, (ii) reduce its $2,350,000 allowed general unsecured claim in the
Bankruptcy Action by $750,000, leaving Purchaser with an allowed general
unsecured claim in the amount of $1,600,000, (iii) the assumption of the Assumed
Liabilities, and (iv) obligation to pay Seller $3.00 per True Ceramic Pro flat
iron unit (a “Unit”) sold by Purchaser in accordance with Section 2.4(b) of the
Purchase Agreement.
 
2
STIPULATION FOR ENTRY OF JUDGMENT
 
A-3
 
 

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B.           CirTran delayed making royalty payments and defaulted under its
obligations under the Purchase Agreement.  On March 9, 2007, ABS filed a First
Complaint against CirTran.  Thereafter, a settlement was reached and CirTran
acknowledged that it owed ABS $130,000 in royalties as of the first quarter of
2007 and agreed to pay ABS weekly payments of $12,500.  Based on said agreement,
ABS dismissed the First Complaint.
 
C.           On September 8, 2008, the Bankruptcy Clerk entered CirTran’s
default in the Adversary Action.
 
D.           On March 17, 2009, judgment was entered in favor of ABS and against
CirTran in the amount of $1,808,233.20 in principal, $643.96 in interest, and
$3,444.45 in costs.
 
E.           On March 17, 2010, the Bankruptcy Court issued a Turnover Order in
favor of ABS ordering CirTran to turn over to ABS its Stock and Membership
Interest Certificates.  On March 24, 2010, CirTran filed a Motion for
Reconsideration, claiming that the Turnover Order exceeded state law statutory
authority and claiming that CirTran no longer had possession of the stock
certificates.  On April 21, 2010, the Bankruptcy Court granted the Motion for
Reconsideration in part and denied it in part, by modifying the Turnover Order
to direct turnover of the stock certificates to a levy officer rather than to
ABS, and denying the request to reconsider the granting of the Turnover Motion.
 
I.           On August 13, 2010, the Court granted the Assignment Application in
part and denied it in part, and ordered the assignment of the original copyright
registrations but not the assignment of CirTran trademarks or patent rights (the
“First Assignment Order”).  The First Assignment Order also enjoined CirTran
from disposing of certain payments from each of its subsidiaries.
 
J.           On September 22, 2010, the Court entered a second Assignment Order
(“Second Assignment Order”).  In the Second Assignment Order the Bankruptcy
Court assigned to ABS CirTran’s interest in payments from all its named
subsidiaries including CirTran Products, CirTran Beverage, and CirTran
Products.  On October 12, 2010, Iehab Hawatmeh, as representative of CirTran,
CirTran Beverage, CirTran Media and CirTran Products was personally served with
the Assignment Order.
 
3
STIPULATION FOR ENTRY OF JUDGMENT
 
A-4
 
 

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K.           On April 13, 2011, the Bankruptcy Court issued an Order to Show
Cause Re: Civil Contempt by CirTran, CirTran Beverage, CirTran Products, CirTran
Media and Iehab Hawatmeh (“OSC re: Contempt”) (Adversary Action docket No.
147).  The Court calendared an evidentiary hearing on the OSC re: Contempt to
July 8, 2011.  The Bankruptcy Court has continued the OSC re: Contempt several
times and it is currently calendared to October 27, 2011.
 
L.           On or about May 13, 2011, ABS filed a Motion for Attorneys’ Fees as
the prevailing party on the Satisfaction Motion.  On July 11, 2011 the
Bankruptcy Court granted the Motion for Attorneys’ Fees in part and awarded ABS
$35,450.50 in attorneys’ fees incurred in ABS’s successful defense against
CirTran’s Satisfaction Motion (“Attorneys’ Fee Judgment”).  On July 22, 2011, YA
Global filed a Motion for Entry of an Order Clarifying and Staying Enforcement
of the Court’s Attorney Fee Judgment.  On August 29, 2011, the Bankruptcy Court
entered an order on YA Global’s Motion ordering ABS’s counsel to deposit and
hold any funds in its trust account which were provided by CirTran in payment of
the Attorney Fee Judgment, and to not disburse any such until December 1, 2011
or after.  The August 29, 2011 order further set a due date of December 1, 2011
for YA Global to conduct a foreclosure sale of its secured collateral under its
financing arrangements with CirTran or ABS would be authorized to disburse the
funds pursuant to its Chapter 11 Plan of Liquidation, confirmed by the
Bankruptcy Court on November 7, 2006.  The order further provided that if such
foreclosure sale was completed, that YA Global would retain its rights to seek
turnover of such funds from ABS under YA Global’s financing arrangements with
CirTran, and in accordance with the Uniform Commercial Code and other applicable
law.
 
O.           The Parties have entered into a Forbearance Agreement dated
February 1, 2012, wherein ABS agreed to forbear from exercising its remedies
under the Judgments.  ABS is willing to forbear from exercising such remedies
for the period set forth herein, provided that the CirTran Parties comply with
the terms of that Forbearance Agreement and that the conditions set forth
therein are met within the time periods required in that Agreement.
 
4
STIPULATION FOR ENTRY OF JUDGMENT
 
A-5
 
 

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P.           This Stipulation for Entry of Judgment is entered into pursuant to
that Forbearance Agreement and will be filed by ABS in the event of default of
that Agreement by CirTran and the CirTran Parties, and upon their failure to
cure the default.
 
Q.           CirTran hereby waives its due process rights to trial by court or
jury, notice and hearing, motion for new trial, to appeal or otherwise seek to
set aside or vacate the stipulated judgment.
 
R.           CirTran had the opportunity to consult with legal counsel of their
choosing concerning their rights with respect to the form, content and meaning
of this Stipulation for Entry of Judgment and the advisability of executing
same.
 
S.           CirTran shall execute all other required documents, if any,
necessary to have judgment entered by the Court in accordance with the terms of
this Stipulation for Entry of Judgment.
 
T.           This Stipulation for Entry of Judgment and the attached and
incorporated form of Judgment Pursuant to Stipulation, is intended by the
Parties as the complete, integrated, and final expression of their agreement for
entry of judgment.  This Stipulation for Entry of Judgment may only be amended
by a writing executed by Plaintiff and Defendant.  No oral amendment, waiver, or
other understanding with respect to the subject matter of this Stipulation for
Entry of Judgment shall be enforceable.  This Stipulation for Entry of Judgment
may be executed by the Parties in counterparts, all of which together shall be
deemed to constitute a single, integrated document
 
II.           STIPULATION
 
IT IS HEREBY STIPULATED:
 
That Judgment be entered in favor of Advanced Beauty Solutions, LLC and against
CirTran Corporation, a Nevada corporation in the amount of Twenty Thousand
Dollars ($20,000) in the form of Judgment attached hereto as Exhibit “A.”
 
5
STIPULATION FOR ENTRY OF JUDGMENT
 
A-6
 
 

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IN WITNESS HEREOF, the parties hereto have caused this Stipulation for Entry of
Judgment to be entered into on the dates indicated below.

 
ADVANCED BEAUTY SOLUTIONS LLC
 
Dated: February ___, 2012
 
By: ____________________________
James Dodo
Authorized Agent for Advanced Beauty Solutions,
LLC, a California limited liability company
 
 
CIRTRAN CORPORATION
 
Dated: February ___, 2012
 
By: ____________________________
Iehab Hawatmeh
Authorized Agent for CirTran Corporation
 

APPROVED AS TO FORM:
 

 
SHULMAN HODGES & BASTIAN LLP
 
Dated: February ___, 2012
 
By: ____________________________
James Bastian
Samuel J. Romero
Attorneys for Plaintiff, Reorganized Debtor,
Advanced Beauty Solutions, LLC,
a California limited liability company
 
 
KRUSE LANDA MAYCOCK & RICKS, LLC
 
Dated: February ___, 2012
 
By: ____________________________
James Kruse
Attorneys for CirTran Corporation
 

6
STIPULATION FOR ENTRY OF JUDGMENT
 
A-7
 
 

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Exhibit B

 
PLEDGE AND SECURITY AGREEMENT
 
This PLEDGE AND SECURITY AGREEMENT (as amended, modified and supplemented and in
effect from time to time, this “Agreement”) dated as of March 1, 2012, is made
by CIRTRAN CORPORATION, a Nevada corporation (“Pledgor”), to ADVANCED BEAUTY
SOLUTIONS, LLC, a California limited liability company (“Secured Party”), with
reference to the following:
 
A. On the date hereof, Secured Party and Pledgor entered into a Forbearance
Agreement (“Forbearance Agreement”) in connection with the payment by Pledgor to
Secured Party for: (1) a March 17, 2009 Judgment against Pledgor and in favor of
the Secured Party in the amount of $1,808,233.20 in principal, $643.96 in
interest, and $3,444.45 in costs entered in the action entitled Advanced Beauty
Solutions, LLC v. CirTran Corporation, Adversary Case No. 1:08-ap-01363-GM
(“Adversary Action”); and (2) a July 11, 2011 Judgment for attorneys’ fees
against Pledgor and in favor of the Secured Party in the amount of $35,450.50
entered in the Adversary Action (referred to as the “Debt”).  Pledgor agreed in
the Forbearance Agreement to pay the Secured Party the sum of $25,000.00 and
$7,500 per month for 48 consecutive months, commencing on January 30, 2012, with
the unpaid balance after reduction for the value of certain intellectual
property rights and claims assigned by Pledgor to Secured Party as finally
determined as provided in the Forbearance Agreement, due and payable on January
30, 2016.
 
B. Pledgor holds ownership interests in the entities listed in Exhibit A
attached hereto and made a part of this Agreement (collectively, the “Pledged
Entities”), which are the collateral for payment of the Debt, pursuant to the
terms and conditions set forth in this Agreement, subject to the prior security
interest of record in favor of YA Global Investments, L.P. (“YA Global”), and to
that certain Subordination Agreement of even date between Pledgor and YA Global
(together, the “Priority YA Global Lien”).  All of the rights and remedies of
Pledgee are subject to the prior rights and remedies of YA Global pursuant to
the Priority YA Global Lien.
 
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
 
ARTICLE I - GRANT OF SECURITY INTEREST; COLLATERAL
 
Section 1.1   Collateral.  As security for the full and punctual performance of
Pledgor’s obligations under the Judgments (as defined in the Forbearance
Agreement) (the “Secured Obligations”), Pledgor hereby grants, pledges,
hypothecates, transfers, and assigns to Secured Party all of (i) Pledgor’s
rights (including Pledgor’s right to vote), title, and interest in the Pledged
Entities, (ii) Pledgor’s right, title, ownership, equity, or other interests in
funds Pledgor receives from the Pledged Entities (collectively referred to as
the “Pledged Interests”), whether now owned or hereafter acquired, now existing
or hereafter arising and wherever located, all rights and benefits appurtenant
thereto, and all proceeds thereof; and (iii) in and to all assets and personal
property of Pledgor, wherever located and whether now or hereinafter existing
and whether now owned or hereafter acquired, of every kind and description,
tangible or intangible, including without limitation, all Goods, Inventory,
Equipment, Fixtures, Instruments, Documents, Accounts, Contracts and Contract
Rights, Chattel Paper, Deposit Accounts, Money, Letters of Credit and
Letter-of-Credit Rights, Commercial Tort Claims, Securities and all other
Investment Property, General Intangibles, Farm Products, all books and records
and information relating to any of the foregoing, all supporting obligations,
and any and all Proceeds and products of any and all of the foregoing, and as
more particularly described on Exhibit A attached hereto (collectively, the
“Collateral”).
 

Pledge and Security Agreement ABS.doc B-1  

 
 
 

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Section 1.2   Definitions.  As used herein, the following terms shall have the
following respective meanings:
 
(a) “Distributions” means all dividends, distributions, sale and/or liquidation
proceeds, cash, profits, instruments and other property and payments or economic
benefits or interests to which Pledgors are entitled with respect to the Pledged
Entities whether or not received by or otherwise distributed to Pledgors,
whether such dividends, distributions, liquidation proceeds, cash, profits,
instruments and other property and economic benefits are paid or distributed by
the Pledged Entities in respect of operating profits, sales, exchanges,
refinancing, condemnations or insured losses of any of the assets of the Pledged
Entities, the liquidation of the Pledged Entities, their assets and affairs,
management fees, guaranteed payments, repayment of loans; reimbursement of
expenses or otherwise in respect of or in the Pledged Entities.
 
(b) “UCC” means the Uniform Commercial Code, as in effect from time to time in
the State of California.
 
(c) Other terms used, but not defined herein, shall have the meanings ascribed
to them on Exhibit B.
 
Section 1.3    Perfection of Security Interest; Further Acts.  Upon Secured
Party’s written request, Pledgor shall promptly take such actions as may be
reasonably required to perfect the security interest of Secured Party in the
Collateral under applicable law.
 
Section 1.4           Acts of Secured Party.  Neither Secured Party nor any of
Secured Party’s trustees, beneficiaries, heirs, successors or assigns, agents,
employees, or counsel shall be liable for any action taken or omitted to be
taken by such party or parties relative to any of the Collateral, except for
such party’s or parties’ own gross negligence or willful misconduct.
 
Section 1.5            Custody of Collateral.  Secured Party shall not have any
duty concerning the collection or protection of the Collateral or any income
thereon or payments with respect thereto, or concerning the preservation of any
rights pertaining thereto beyond exercising reasonable care with respect to the
custody of any tangible evidence of the Collateral actually in its possession.
 
Section 1.6           Security Interest and Delivery.  Pledgor hereby grants to
Secured Party a continuing security interest in the Collateral to secure prompt
payment and performance by Pledgor of Pledgor’s obligations under the
Forbearance Agreement.
 
ARTICLE II - POWERS OF PLEDGOR PRIOR TO AN EVENT OF DEFAULT
 
Section 2.1           Distributions; Exercise of Rights.  Until the occurrence
of any uncured Event of Default (as defined in Section 4) and so long as any
cash Distribution is not subject to the terms of the Forbearance Agreement,
Pledgor shall be entitled to (a) receive cash Distributions allocable to the
Collateral, and (b) exercise the voting, administration, management, and all
other powers, rights, and duties of Pledgor with respect to the Pledged
Entities’ operating agreement or bylaws, as applicable, subject to the priority
rights of YA Global under the Priority YA Global Lien.  If Pledgor shall become
entitled to receive or shall receive from the Pledged Entities, any non-cash
Distribution as an addition to, on account of, in substitution of, or in
exchange for the Collateral or any part thereof, the same shall be received and
held by Pledgor in trust and as agent for Secured Party, subject to the priority
rights of YA Global.
 

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Section 2.2           Termination of Powers.  Upon the occurrence of a default
that is continuing, all such powers, rights, and remedies of Pledgor, which are
conditionally permitted pursuant to Section 2.1, shall cease and the provisions
of Section 4 hereof shall apply, subject to the priority rights of YA Global
under the Priority YA Global Lien.
 
ARTICLE III - REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR
 
Pledgor hereby covenants with Secured Party, and represents and warrants to
Secured Party, subject to the provisions of that certain Forbearance Agreement
of even date between the parties and the Priority YA Global Lien and other
liens, claims or encumbrances of record as of the date hereof, as follows:
 
Section 3.1           Ownership.  Pledgor is the owner of the Collateral and
does not have outstanding options or rights or other agreements to acquire or
sell or otherwise transfer all or any portion of the Collateral.
 
Section 3.2           Title to Collateral.  Title to the Collateral is subject
to the Priority YA Global Lien and other liens and encumbrances of record for
unpaid taxes, assessments and judgments.
 
Section 3.3            Collateral Documents.  The Collateral and all
certificates, writings, papers, and documents relating to the Collateral are
genuine and in all respects what they purport to be, and all information
relating to the Collateral, including financial information, whether previously
or in the future, is or will be true, complete, and correct in all material
respects, and Pledgor expressly acknowledges that Secured Party is relying on
such information.
 
Section 3.4           No Transfer.  Except pursuant to the Priority YA Global
Lien and other liens of record as of the date hereof and except for the transfer
affected by this Agreement and the Forbearance Agreement, Pledgor will not
transfer the Collateral, or any portion thereof, or suffer or permit any
transfer thereof to occur.
 
Section 3.5           Property of the Pledged Entities.  For those Pledged
Entities in which Pledgor owns a controlling interest, Pledgor shall cause such
Pledged Entities to make complete and timely payment or deposit of all federal,
state, and local taxes, assessments, or contributions required by law and shall,
upon request, provide Secured Party with documentation evidencing that such
taxes, assessments, or contributions were paid.  Pledgor indemnifies Secured
Party against any loss or liability suffered or incurred by Secured Party by
reason of such taxes, assessments, or contributions.
 
Section 3.6           No Financing Statements.  Except for the Priority YA
Global Lien and other liens of record as of the date hereof, financing
statements filed or to be filed in favor of Secured Party as secured party, or
such other financing statements expressly permitted with Secured Party’s prior
written consent, which may be withheld in Secured Party’s sole discretion, there
are not now, and will not in the future be, and Pledgor will not execute or
permit, any financing statements under the UCC covering any or all of the
Collateral, and no such financing statements are, or will be, filed in any
public office.
 
Section 3.7           Inspection of Collateral.  Pledgor will permit Secured
Party to have access to and inspect the Collateral and the books, records, and
files of Pledgor and the Pledged Entities pertaining thereto, during normal
business hours.
 

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Section 3.7           Secured Party’s Right to Perform Acts.  Subject to the
rights of YA Global pursuant to the Priority YA Global Lien, Pledgor authorizes
Secured Party to perform any and all acts that Secured Party in good faith deems
necessary for protection and preservation of the Collateral or its value, or
Secured Party’s security interest therein, including but not limited to,
immediately transferring upon request by Secured Party any Collateral into
Secured Party’s own name.  Pledgor agrees to take such other actions and to
execute and deliver such other writings, documents, notices, financing
statements, and/or instructions as Secured Party shall deem necessary or
desirable to perfect and maintain perfected Secured Party’s security interest in
the Collateral.  Pledgor hereby appoints Secured Party, with full power of
substitution, whether or not a default has occurred or is continuing hereunder,
as attorney-in-fact of Pledgor for the purpose of carrying out of the provisions
of this Agreement, dealing with, maintaining, or foreclosing Secured Party’s
interest in the Collateral, and taking any action, pressing any claim, executing
any instrument, and providing any endorsement that Secured Party may deem
necessary or advisable to accomplish the purpose hereof, which appointment being
coupled with an interest is irrevocable for the term hereof, all subject to the
Prior YA Global Lien.
 
ARTICLE IV - EVENTS OF DEFAULT AND REMEDIES
 
Section 4.1            Events of Default.  An event of default shall occur and
be continuing upon the occurrence of any of the following (“Event(s) of
Default”):
 
(a) Pledgor fails to perform Pledgor’s obligations under the Forbearance
Agreement and/or this Agreement;
 
(b) Any statement or representation made by Pledgor under the Forbearance
Agreement or this Agreement is false when made in any material respect; and
 
(c) A petition in bankruptcy is filed by or against Pledgor, a receiver is
appointed over the Collateral, or Pledgor makes an assignment for the benefit of
creditors.
 
Section 4.2           Secured Party’s Remedies.  Upon the occurrence of an Event
of Default, Secured Party may, at Secured Party’s option, and without notice,
declare that the outstanding principal and all accrued interest are immediately
due and payable, terminate any agreement for the rights granted under Section
2.1 above, and in addition to, and in furtherance of, all rights and remedies of
a secured party under the UCC, any other statute or rules, and the Forbearance
Agreement, subject to the Priority YA Global Lien, the Secured Party shall have
the right to:
 
(a) effect the transfer of any or all of the Collateral, subject only to the
provisions of the UCC and any other applicable statute that, in accordance with
such statute, cannot be waived, in any one or more of the following ways;
 
(b) proceed by a suit or suits at law or in equity to foreclose all or any part
of the security interests in the Collateral and sell the Collateral or any
portion thereof, under a judgment or decree of a court of competent
jurisdiction, retaining during the duration of such judicial enforcement all
other rights with respect to the Collateral; and
 
(c) exercise all of the rights and remedies of a secured party under the UCC.
 
Section 4.3           Remedies Cumulative.  The obligations of Pledgor under
this Agreement shall be absolute and unconditional and shall remain in full
force and effect without regard to, and shall not be released, suspended,
discharged, terminated, or otherwise affected by, any circumstances or
occurrence except as specifically provided in this Agreement.  The rights,
powers, and remedies of Secured Party under this Agreement shall be cumulative
and not exclusive of any other right, power, or remedy that Secured Party may
have against Pledgor or any other person or entity pledging collateral pursuant
to the Forbearance Agreement or existing at law or in equity or
otherwise.  Secured Party’s rights, powers, and remedies may be pursued singly,
concurrently, or otherwise, at such time and in such order as Secured Party may
determine in Secured Party’s sole and absolute discretion.  Secured Party shall
have no duty to exercise any of the aforesaid rights, powers, and remedies and
shall not be responsible for any failure to do so or delay in so doing.
 

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Section 4.4           Application of Collateral.  All proceeds from the sale of
all or any portion of the Collateral, and all Distributions now or at any time
hereafter received or retained by Secured Party pursuant to the provisions of
this Agreement, shall be applied by Secured Party to the satisfaction of
Pledgor’s obligations under the Forbearance Agreement in such order and priority
as determined by Secured Party in its sole and absolute discretion and in
accordance with applicable law.
 
Section 4.5           Preferences.  To the extent Pledgor makes a payment or
payments to Secured Party, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
or required to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment or proceeds received, Pledgor’s obligations intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received by Secured Party.
 
ARTICLE V - MISCELLANEOUS PROVISIONS
 
Section 5.1           Further Assurances.  Pledgor hereby agrees to sign and
deliver to Secured Party financing statements, continuation statements, and
other documents, agreements, and instruments, in form acceptable to Secured
Party, and do such further acts, as Secured Party may from time to time
reasonably request or which are reasonably necessary to establish and maintain a
valid and perfected security interest in the Collateral (and to pay any filing
fees relative thereto) or to further assure or confirm Secured Party’s rights
hereunder.  Without limiting the foregoing, Pledgor authorizes Secured Party, to
the extent permitted by law, to file such financing statements and amendments
thereto and continuations thereof relating to all or any part of the Collateral
without the signatures of Pledgor (including, to the extent permitted by law, to
file a photographic or other reproduction of this Agreement).
 
Section 5.2           No Release, Etc.  No delay or omission to exercise any
remedy, right, or power accruing upon an Event of Default or an Event of Default
shall impair any such remedy, right, or power or shall be construed as a waiver
thereof, but any such remedy, right, or power may be exercised from time to time
and as often as may be deemed expedient.  A waiver of an Event of Default shall
not be construed to be a waiver of any subsequent Event of Default or to impair
any remedy, right, or power of Secured Party.  Any and all of Secured Party’s
rights with respect to any Collateral shall continue unimpaired, and Pledgor
shall be and remain obligated in accordance with the terms hereof,
notwithstanding, among other things: (a) any renewal, extension, amendment, or
modification of, or addition or supplement to, or deletion from, this Agreement
or the Forbearance Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (b) any waiver, consent,
delay, extension of time, indulgence, or other action or inaction under or in
respect of this Agreement or Forbearance Agreement; (c) any exercise or
non-exercise of any right, remedy, power, or privilege under or in respect of
this Agreement or the Forbearance Agreement; (d) any sale, exchange, release,
surrender, or substitution of, or realization upon, any Collateral (except to
the extent otherwise specifically agreed to by Secured Party) or any other
security held by Secured Party to secure the Indebtedness; (e) the furnishing to
or acceptance by Secured Party of any additional security to secure the
Indebtedness; or (f) any invalidity, irregularity, or unenforceability of all or
any part of Pledgor’s obligations or of any security therefor.
 
Section 5.3           Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
 

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Section 5.4           Modification; Waiver in Writing.  No modification,
amendment, extension, discharge, termination, or waiver of any provision of this
Agreement, nor consent to any departure by Pledgor therefrom, shall in any event
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given.  Except as
otherwise expressly provided herein, no notice to or demand on Pledgor shall
entitle Pledgor to any other or future notice or demand in the same, similar, or
other circumstances.
 
Section 5.5           Number and Gender.  All references to sections and
exhibits are to sections and exhibits in or to this Agreement unless otherwise
specified.  Unless otherwise specified, the words “hereof,” “herein,” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision, article,
section, or other subdivision of this Agreement.  Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined.  Whenever the
context may require, any pronouns used herein shall include the corresponding
masculine, feminine, or neuter forms, and the singular form of nouns and
pronouns shall include the plural and vice versa.
 
Section 5.6           Headings, Etc.  The headings and captions of various
paragraphs of this Agreement are for the convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
 
Section 5.7           Counterparts.  This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement.  The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.
 
Section 5.8           Entire Agreement.  This Agreement, the exhibits attached
hereto, and the Forbearance Agreement embody the final, entire agreement of
Pledgor and Secured Party with respect to Pledgor’s obligations and supersede
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof.  This Agreement
is intended by Pledgor and Secured Party as a final and complete expression of
the terms of the Agreement, and no course of dealing between Pledgor and Secured
Party, no course of performance, no trade practices, and no evidence of prior,
contemporaneous or subsequent oral agreements or discussions or other extrinsic
evidence of any nature shall be used to contradict, vary, supplement or modify
any term of this Agreement.  There are no oral agreements between Pledgor and
Secured Party.
 
Section 5.9           Waiver of Right to Trial by Jury.  PLEDGOR HEREBY AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT, OR ANY CLAIM, COUNTERCLAIM, OR
OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY PLEDGOR, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE.  SECURED PARTY IS. HEREBY AUTHORIZED TO FILE A COPY
OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
PLEDGOR.
 

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Section 5.10         Successors and Assigns.  This Agreement and all obligations
of Pledgor hereunder shall be binding upon the successors and assigns of
Pledgor, except that Pledgor, unless otherwise expressly provided in the
Forbearance Agreement and this Agreement and then only to the extent provided
therein, shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of Secured Party.  Secured Party shall
have the right to assign its interest in this Agreement and all rights and
remedies of Secured Party hereunder shall inure to the benefit of Secured Party
and its participants, successors and assigns.  Neither this Agreement nor
anything set forth herein is intended to, nor shall it, confer any rights on any
person or entity other than the parties hereto and all third party rights are
expressly negated.
 
Section 5.11         Notices. All notices, consents, approvals, or other
instruments required or permitted to be given by either party pursuant to this
Agreement shall be in writing and given by (i) hand delivery, or (ii) express
overnight delivery service and shall be deemed to have been delivered upon
(a) receipt, if hand delivered, (b) the next business day following the date of
deposit with the delivery service, if delivered by express overnight delivery
service.  Notices shall be provided to the parties and addresses specified in
the introductory paragraph of this Agreement or to such other address as such
Pledgor or Secured Party, as the case may be, shall in like manner designate in
writing.
 
Section 5.12        Termination.  Upon the indefeasible payment and performance
in full of Pledgor’s obligations to Secured Party, this Agreement shall
terminate and upon Secured Party’s execution and delivery to Pledgor of
documents prepared by Pledgor and acceptable to Secured Party, which shall, upon
such execution and delivery, terminate Secured Party’s lien on the Collateral.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by its duly authorized officer on the date first set forth above.
 
PLEDGOR:
 
CirTran Corporation, a Nevada corporation
 
By: /s/ Iehab Hawatmeh
Name: Iehab Hawatmeh
Title: Chief Executive Officer
 

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EXHIBIT A
 
PLEDGED ENTITIES
 
Name
 
Percentage Interest
Owned by Pledgor
Racore Network, Inc., a Utah corporation
 
100%
Racore Technology Corporation, a Utah corporation
 
100%
CirTran Corporation, a Utah corporation
 
100%
CirTran- Asia, Inc., a Utah corporation
 
100%
CirTran Beverage Corp., a Utah corporation
 
100%
CirTran Media Corp., a Utah corporation
 
100%
CirTran Online Corp., a Utah corporation
 
100%
CirTran Products Corp., a Utah corporation
 
   100%*

 
 

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EXHIBIT B
 
DEFINITION OF COLLATERAL
 
 
For the purpose of securing prompt and complete payment and performance by the
Pledgor of all of the Obligations, Pledgor unconditionally and irrevocably
hereby grants to the Secured Party a continuing security interest in and to, and
lien upon, the following “Collateral” of the Pledgor (all capitalized terms used
herein and not defined in the Agreement shall have the respective meaning’s
ascribed thereto in the UCC):
 
All personal property of Pledgor, wherever located and whether now or
hereinafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible, including without limitation, all:
 
1. Goods;
 
2. Inventory, including, without limitation, all goods, merchandise and other
personal property which are held for sale or lease, or are furnished or to be
furnished under any contract of service or are raw materials, work-in-process,
supplies or materials used or consumed in the Pledgor’s business, and all
products thereof, and all substitutions, replacements, additions or accessions
therefor and thereto; and any cash or non-cash Proceeds of all of the foregoing;
 
3. Equipment, including, without limitation, all machinery, equipment,
furniture, parts, tools and dies, of every kind and description, of the Pledgor
(including automotive equipment and motor vehicles), now owned or hereafter
acquired by the Pledgor, and used or acquired for use in the business of the
Pledgor, together with all accessions thereto and all substitutions and
replacements thereof and parts therefor and all cash or non-cash Proceeds of the
foregoing;
 
4. Fixtures, including, without limitation, all goods which are so related to
particular real estate that an interest in them arises under real estate law and
all accessions thereto, replacements thereof and substitutions therefor,
including, but not limited to, plumbing, heating and lighting apparatus,
mantels, floor coverings, furniture, furnishings, draperies, screens, storm
windows and doors, awnings, shrubbery, plants, boilers, tanks, machinery,
stoves, gas and electric ranges, wall cabinets, appliances, furnaces, dynamos,
motors, elevators and elevator machinery, radiators, blinds and all laundry,
refrigerating, gas, electric, ventilating, air-refrigerating, air-conditioning,
incinerating and sprinkling and other fire prevention or extinguishing equipment
of whatsoever kind and nature and any replacements, accessions and additions
thereto, Proceeds thereof and substitutions therefor;
 
5. Instruments (including promissory notes);
 
6. Documents;
 
7. Accounts, including, without limitation, all Contract Rights and accounts
receivable, health-care-insurance receivables, and license fees; any other
obligations or indebtedness owed to the Pledgor from whatever source arising;
all rights of Pledgor to receive any payments in money or kind; all guarantees
of Accounts and security therefor; all cash or non-cash Proceeds of all of the
foregoing; all of the right, title and interest of Pledgor in and with respect
to the goods, services or other property which gave rise to or which secure any
of the accounts and insurance policies and proceeds relating thereto, and all of
the rights of the Pledgor as an unpaid seller of goods or services, including,
without limitation the rights of stoppage in transit, replevin, reclamation and
resale and all of the foregoing, whether now existing or hereafter created or
acquired;
 
 

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8. Contracts and Contract Rights, including, to the extent not included in the
definition of Accounts, all rights to payment or performance under a contract
not yet earned by performance and not evidenced by an Instrument or Chattel
Paper;
 
9. Chattel Paper (whether tangible or electronic);
 
10. Deposit Accounts (and in and to any deposits or other sums at any time
credited to each such Deposit Account);
 
11. Money, cash and cash equivalents;
 
12. Letters-of-Credit and Letter-of-Credit Rights (whether or not such
Letter-of-Credit is evidenced by a writing);
 
13. Commercial Tort Claims;
 
14. Securities Accounts, Security Entitlements, Securities, Financial Assets and
all other Investment Property, including, without limitation, all ownership or
membership interests in any subsidiaries or affiliates (whether-or not
controlled by the Pledgor);
 
15. General Intangibles, including, without limitation, all Payment Intangibles
and Intellectual Property, tax refunds and other claims of the Pledgor against
any governmental authority, and all choses in action, insurance proceeds,
goodwill customer lists, formulae, permits, research and literary rights, and
franchises.
 
16. Farm Products;
 
17. All books and records and information (including all ledger sheets, files,
computer programs, tapes and related data processing software) evidencing an
interest in or relating to any of the foregoing and/or to the operation of the
Pledgor’s business, and all rights of access to such books .and records, and
information, and all property in which such books and records, and information
are stored, recorded and maintained.
 
18. To the extent not already included above, all Supporting Obligations, and
any and all cash and non-cash Proceeds, products, accessions, and/or
replacements of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing.
 
 

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Exhibit C

 
TRADEMARK ASSIGNMENT
 
WHEREAS, CIRTRAN CORPORATION (the “Assignor”), a Nevada corporation, is using
certain trademarks in conjunction with its business, including but not limited
to the trademarks and registrations thereof set forth in Schedule A attached
hereto (all hereinafter collectively referred to as the “Trademarks”);
 
WHEREAS, ADVANCED BEAUTY SOLUTIONS, LLC (the “Assignee”), a California limited
liability company, is desirous of acquiring the entire right, title and interest
in and to said Trademarks, including the right to bring actions for infringement
of said Trademarks occurring prior to the date of this Assignment; and
 
WHEREAS, Assignor wishes to herein memorialize said assignment, transfer and
sale of the Trademarks to Assignee.
 
NOW, THEREFORE, TO ALL WHOM IT MAY CONCERN, be it known that for good and
valuable consideration set forth in the Forbearance Agreement entered into
between Assignor and Assignee as of March 1, 2012, the receipt and legal
sufficiency of which is hereby acknowledged, subject to the terms of that
certain Order Pursuant to Sections 105, 363, 365 and 1146 of the Bankruptcy Code
(the “Sale Order”), the Assignor has sold, assigned and transferred, and by
these presents does sell, assign and transfer unto the Assignee, the entire
right, title and interest in and to the Trademarks, and in and to all of the
goodwill of the business appurtenant thereto, together with all claims for
damages by reason of past or current infringement of same, with the right to sue
for and collect the same for its own use and enjoyment, and for the use and
enjoyment of its successors, assigns or other legal representatives.
 
AND, the Assignor hereby requests the United States Commissioner of Patents and
Trademarks (the “Commissioner”), as well as his or her foreign counterparts in
the foreign jurisdictions which exercise authority over any of the Trademarks to
record this Trademark Assignment. The Assignor hereby further requests the
Commissioner and his or her foreign counterparts to issue any and all
registrations resulting from applications to register the Trademarks resulting
from applications among the Trademarks or derived therefrom to Assignee as
assignee of the entire interest.

AND, the Assignor hereby warrants only against claims arising by, through or
under Assignor and covenants that pursuant to the Sale Order, it has full right
to convey the entire interest herein assigned, and that the Assignor has not
executed, and will not execute, any agreement inconsistent herewith.

ASSIGNEE AGREES AND ACKNOWLEDGES THAT THE TRADEMARKS ARE CONVEYED “AS IS” AND
WITHOUT WARRANTY OF ANY KIND NOT EXPRESSLY SET FORTH HEREIN.  ASSIGNOR EXPRESSLY
DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED ON TRADEMARKS, INCLUDING BUT NOT
LIMITED TO, NONINFRINGEMENT OF THIRD PARTY RIGHTS, AND ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  ASSIGNOR DOES NOT WARRANT
THAT THE FUNCTIONS CONTAINED IN THE INTELLECTUAL PROPERTY WILL MEET ASSIGNEE’S
REQUIREMENTS, OR THAT THE OPERATION OF THE INTELLECTUAL PROPERTY WILL BE
UNINTERRUPTED OR ERROR-FREE.
 

 

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NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY ASSIGNOR OR AN AUTHORIZED
REPRESENTATIVE TO ASSIGNEE SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE
SCOPE OF THE LIMITED WARRANTY SET FORTH HEREIN.  ASSIGNEE ACCEPTS THE RISKS OF
USE AND EXCEPT AS OTHERWISE STATED HEREIN, SUCH RISKS FALL SOLELY ON ASSIGNEE.
 
ASSIGNEE FURTHER ACKNOWLEDGES AND AGREES THAT ASSIGNOR DOES NOT WARRANT THAT THE
TRADEMARKS ARE FREE OF CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT BY ANY THIRD
PARTY.  ASSIGNOR HEREBY DISCLAIMS ANY SUCH WARRANTY OR INDEMNIFICATION AGAINST
TRADEMARK INFRINGEMENT(S).  NOTWITHSTANDING THE ABOVE DISCLAIMER BY ASSIGNOR,
ASSIGNOR AND ITS AGENTS AND EMPLOYEES REPRESENT THAT THEY HAVE NO KNOWLEDGE OF
ANY TRADEMARK INFRINGEMENT CLAIM(S) BY ANY THIRD PARTY.
 
AND, the Assignor, for itself and its successors and assigns, hereby covenants
and agrees that at any time and from time to time forthwith upon the request of
the Assignee, the Assignor will do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
instruments, transfers and assurances as may be reasonably required by the
Assignee in order to assign, transfer, set over and convey unto, and vest in,
the Assignee, its respective successors and assigns, any and all of the
Trademarks, and to put the Assignee in actual possession and operating control
thereof, to assist the Assignee in exercising all rights with respect thereto
and to assure the Assignee of the full benefits thereof.
 
AND, the Assignor hereby constitutes and appoints the Assignee and its
successors and assigns as its true and lawful attorneys in fact in connection
with the transactions contemplated by this instrument, with full power of
substitution to demand and receive, in the name and stead of the Assignor but on
behalf of and for the benefit of the Assignee and its successors and assigns,
any and all of the trademarks hereby conveyed, assigned, and transferred or
intended so to be, and to give receipt and releases for and in respect of the
same and any part thereof, and from time to time to institute and prosecute, in
the name of the Assignor or otherwise, for the benefit of the Assignee or its
successors and assigns, proceedings at law, in equity, or otherwise, which the
Assignee or its successors or assigns deem proper in order to collect or reduce
to possession or endorse any of the Trademarks, and to do all acts and things in
relation to such trademarks that the Assignee or its successors or assigns
reasonably deem desirable.
 
In the event that any provision of this Agreement would, under applicable law,
be invalid or unenforceable in any respect, such provision shall be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. Any term or provision of
this Agreement that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
item or provision in any other situation or in any other jurisdiction.
 
This Agreement shall be binding upon and shall inure to the benefit of the
respective successors and permitted assigns of the Assignor and the Assignee.
This Agreement shall not confer any rights or remedies upon any person other
than the parties hereto, and their respective successors and permitted assigns.
 
 

Trademark Assignment ABS.doc C-2  

 
 
 
 

--------------------------------------------------------------------------------

 
 
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice or
conflict of law.
 
IN TESTIMONY WHEREOF, the Assignor has caused this Assignment to be executed by
its duly authorized representative on March 1, 2012.
 
 
 

  ADVANCED BEAUTY SOLUTIONS, LLC               By: /s/ Jason Dodo     Name:
Jason Dodo     Title: Manager                 CIRTRAN CORPORATION              
  By: /s/ Iehab Hawatmeh     Name: Iehab Hawatmeh     Title: President  

 
 

Trademark Assignment ABS.doc C-3  

 

 
 

--------------------------------------------------------------------------------

 
                                             

 
CERTIFICATE OF ACKNOWLEDGEMENT
 
 
STATE OF ___________________)
  ) SS.
COUNTY OF _________________)
 
I, ____________________________________, a Notary Public in and for the County
and State aforesaid, do hereby certify
that_________________________________________, personally known to me to be the
same person(s) whose name(s) is (are) subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that they signed, sealed
and delivered the said instrument as a free act and deed on behalf of the
identified company, ADVANCED BEAUTY SOLUTIONS, LLC, a California limited
liability company, with authority to do so.
 
IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal, this _____
day of December, 2011.

 

  _____________________________________________________________________________ 
  Notary Public   Commission Expires:
____________________________________________________________

 
                                                                    
 
STATE OF ___________________)
  ) SS.
COUNTY OF _________________)

 
I, ____________________________________, a Notary Public in and for the County
and State aforesaid, do hereby certify
that_________________________________________, personally known to me to be the
same person(s) whose name(s) is (are) subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that they signed, sealed
and delivered the said instrument as a free act and deed on behalf of the
identified company, ADVANCED BEAUTY SOLUTIONS, LLC, a California limited
liability company, with authority to do so.
 
IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal, this _____
day of December, 2011.

 

  _____________________________________________________________________________ 
  Notary Public   Commission Expires:
____________________________________________________________

 
 

Trademark Assignment ABS.doc C-4  

 
 
 

--------------------------------------------------------------------------------

 

 
SCHEDULE A TO TRADEMARK ASSIGNMENT
 
TRADEMARK REGISTRATIONS
 

Country
Mark
Date Filed
Date Registered
Serial/Registration Number
United States
True Ceramic Pro
4-9-2004
n/a
78/399698
International
True Ceramic Pro
10-13-2004
10-13-2004
0861761
                                                                               
                                       

 

 

Trademark Assignment ABS.doc C-5  

 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit D

 
CLAIM ASSIGNMENT
 
WHEREAS, CIRTRAN CORPORATION (the “Assignor”), a Nevada corporation, is holder
of an allowed general unsecured claim in the amount of $1,600,000 in the Chapter
11 bankruptcy action filed in Bankruptcy Court of the Central District of
California by Advanced Beauty Solutions, LLC entitled In re Advanced Beauty
Solutions, LLC, Case No. 1:06-bk-10076-GM (the “Bankruptcy Action”);
 
WHEREAS, ADVANCED BEAUTY SOLUTIONS, LLC (the “Assignee”), a California limited
liability company, is desirous of acquiring the entire right, title and interest
in CirTran’s right to payment of its general unsecured claim in the Bankruptcy
Action in connection with a Forbearance Agreement with Assignor of this same
date; and
 
WHEREAS, Assignor wishes to herein memorialize said assignment, transfer and
sale of the right to payment to Assignee.
 
NOW, THEREFORE, TO ALL WHOM IT MAY CONCERN, be it known that for good and
valuable consideration set forth in the Forbearance Agreement entered into
between Assignor and Assignee as of March 1, 2012, the receipt and legal
sufficiency of which is hereby acknowledged, subject to the terms of that
certain Order Pursuant to Sections 105, 363, 365 and 1146 of the Bankruptcy
Code, the Assignor has sold, assigned and transferred, and by these presents
does sell, assign and transfer unto the Assignee, the entire right, title and
interest in and to the Assignor allowed unsecured claim in the Bankruptcy Action
against the estate of ABS to the extent of the balance due under the Forbearance
Agreement, after adjustment for the value of the intellectual property assigned
pursuant to the Forbearance Agreement. Any distribution on such creditor claim
in excess of the permitted amounts due pursuant to the Forbearance Agreement
shall be paid to CirTran. If ABS shall receive any distribution in excess of the
permitted amounts due to ABS pursuant to this Claim Assignment, the same shall
be received and held by ABS in trust and as agent for CirTran, and ABS shall,
without notice or demand from CirTran, immediately, but in any event within five
business days after receipt, pay the entire amount of such excess to CirTran.

AND, the Assignor hereby conveys the claim and interest assigned hereby “as is”
and without representation or warranty as to enforceability, validity or
efficacy against any third party and warrants and represents only against claims
arising by, through or under it, that it has full right to convey the entire
interest herein assigned, and that the Assignor has not executed, and will not
execute, any agreement inconsistent herewith.
 
AND, the Assignor, for itself and its successors and assigns, hereby covenants
and agrees that at any time and from time to time forthwith upon the request of
the Assignee, the Assignor will do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
instruments, transfers and assurances as may be reasonably required by the
Assignee in order to assign, transfer, set over and convey unto, and vest in,
the Assignee, its respective successors and assigns, any and all of the right to
payment in the Bankruptcy Action, and to assist the Assignee in exercising all
rights with respect thereto and to assure the Assignee of the full benefits
thereof.
 

Claim Assignment ABS.doc D-1  

 
 
 

--------------------------------------------------------------------------------

 
 
 
In the event that any provision of this Agreement would, under applicable law,
be invalid or unenforceable in any respect, such provision shall be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. Any term or provision of
this Agreement that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
item or provision in any other situation or in any other jurisdiction.
 
This Agreement shall be binding upon and shall inure to the benefit of the
respective successors and permitted assigns of the Assignor and the Assignee.
This Agreement shall not confer any rights or remedies upon any person other
than the parties hereto, and their respective successors and permitted assigns.
 
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice or
conflict of law.
 
IN TESTIMONY WHEREOF, the Assignor has caused this Assignment to be executed by
its duly authorized representative on March 1, 2012.
 
 

  ADVANCED BEAUTY SOLUTIONS, LLC               By: /s/ Jason Dodo     Name:
Jason Dodo     Title: Manager                 CIRTRAN CORPORATION              
  By: /s/ Iehab J. Hawatmeh     Name: Iehab J. Hawatmeh     Title: President  

 
 

                                                                           
                                                                   

 

Claim Assignment ABS.doc D-2  

 
 
 

--------------------------------------------------------------------------------

 
 
CERTIFICATE OF ACKNOWLEDGEMENT
 
 
STATE OF ___________________)
  ) SS.
COUNTY OF _________________)
 
I, ____________________________________, a Notary Public in and for the County
and State aforesaid, do hereby certify
that_________________________________________, personally known to me to be the
same person(s) whose name(s) is (are) subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that they signed, sealed
and delivered the said instrument as a free act and deed on behalf of the
identified company, ADVANCED BEAUTY SOLUTIONS, LLC, a California limited
liability company, with authority to do so.
 
IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal, this _____
day of December, 2011.

 

  _____________________________________________________________________________ 
  Notary Public   Commission Expires:
____________________________________________________________

 
                                                                    
 
STATE OF ___________________)
  ) SS.
COUNTY OF _________________)
 
I, ____________________________________, a Notary Public in and for the County
and State aforesaid, do hereby certify
that_________________________________________, personally known to me to be the
same person(s) whose name(s) is (are) subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that they signed, sealed
and delivered the said instrument as a free act and deed on behalf of the
identified company, ADVANCED BEAUTY SOLUTIONS, LLC, a California limited
liability company, with authority to do so.
 
IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal, this _____
day of December, 2011.

 

  _____________________________________________________________________________ 
  Notary Public   Commission Expires:
____________________________________________________________

                                                                      

 

Claim Assignment ABS.doc D-3  

 
 
 
 

--------------------------------------------------------------------------------

 
 
 
Exhibit E
 
SUBORDINATION AGREEMENT

This SUBORDINATION AGREEMENT (this “Agreement”) is made as of March 1, 2012, by
and between YA GLOBAL INVESTMENTS, L.P., a Cayman Island exempt limited
partnership (“YA Global”), and ADVANCED BEAUTY SOLUTIONS, LLC, a California
limited liability company (“ABS”, and together with YA Global, collectively, the
“Creditors”).
 
WITNESSETH

WHEREAS, YA Global has entered into a certain Forbearance Agreement and
Amendment of even date herewith (the “YA Global Forbearance Agreement”) with
CirTran Corporation, a Nevada corporation (the “Borrower”), and the Borrower’s
subsidiaries Racore Network, Inc., CirTran - Asia, Inc., CirTran Beverage Corp.,
CirTran Media Corp., CirTran Online Corp., CirTran Products Corp., and CirTran
Corporation, each a Utah corporation (collectively, together with the Borrower
and Iehab Hawatmeh, the “Obligors”);

WHEREAS, pursuant to the Financing Documents (as defined in the YA Global
Forbearance Agreement), YA Global is the holder of security interests in and to,
and liens upon, all assets of the Obligors (collectively, the “Senior Liens”);

WHEREAS, ABS has entered into a certain Forbearance Agreement of even date
herewith (the “ABS Forbearance Agreement”) with the Borrower and, for the
limited and express purposes set forth in the ABS Forbearance Agreement, CirTran
Beverage Corp., CirTran Media Corp., CirTran Products Corp., and Iehab Hawatmeh;

WHEREAS, pursuant to the Pledge and Security Agreement (as defined in the ABS
Forbearance Agreement), ABS is the holder of security interests in and to, and
liens upon, all assets of the Borrower (collectively, the “Junior Liens”);

WHEREAS, it is a condition precedent to YA Global’s agreement to forbear under
the YA Global Forbearance Agreement that ABS enter into this Agreement;

WHEREAS, it is a condition precedent to ABS’s agreement to forbear under the ABS
Forbearance Agreement that YA Global enter into this Agreement; and

WHEREAS, the Creditors desire to enter into this Agreement to set forth their
respective understanding with respect to priority of their respective security
interests and liens.

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed by and between YA Global and ABS as follows:
 
 

Subordination Agreement ABS.doc  E-1  

 
 
 

--------------------------------------------------------------------------------

 

 
1. Any and all obligations and liabilities of the Obligors to ABS, including,
without limitation, those more particularly described in the ABS Forbearance
Agreement (collectively, the “Subordinated Indebtedness”), shall be and hereby
are subordinated and the payment thereof is deferred until the full, final, and
indefeasible payment in good and collected funds of the Obligations (as defined
in the YA Global Forbearance Agreement).  Notwithstanding the foregoing, until
the occurrence of a Termination Event (as defined in the YA Global Forbearance
Agreement), ABS shall be entitled to receive the regularly scheduled payments
set forth in the ABS Forbearance Agreement (as in effect on the date hereof)
free and clear of YA Global’s senior lien but subject to paragraph 11
herein.  From and after the occurrence of a Termination Event, ABS agrees that
no payments may be received from the Obligors with respect to the Subordinated
Indebtedness unless such Termination Event is cured, or waived by YA Global in
writing, or the Obligations are fully, finally, and indefeasibly paid.  Any
payments or proceeds received by ABS with respect to the Subordinated
Indebtedness after the occurrence of a Termination Event or in excess of the
amounts expressly permitted pursuant to this paragraph, shall be held by ABS in
trust for the benefit of YA Global and ABS agrees to promptly forward all such
funds to YA Global in the same form received from the Obligors and with all
necessary endorsements thereon.  Unless and until the Obligations are fully,
finally, and indefeasibly paid, ABS agrees it will not take any action of any
kind to accelerate, collect, demand, or enforce payment of the Subordinated
Indebtedness.

2. Notwithstanding the order of creation, attachment, perfection, or the
ordering of the filing of any financing statements, continuation statements, or
other instruments to reflect or evidence the Senior Liens and the Junior Liens,
the Senior Liens shall, in any event, be senior to the Junior Liens and any
other interest granted to, or created in favor of, ABS with respect to the
assets of the Obligors to secure the Subordinated Indebtedness.

3. Upon the occurrence and during the existence of any Termination Event, or in
the event of commencement of secured party sale, foreclosure, or comparable
proceedings in connection therewith, YA Global and ABS hereby agree that:

a. YA Global shall have the exclusive right to sell, transfer, or otherwise
dispose of the assets of the Obligors as provided in the Financing Documents and
applicable law, and to foreclose on the Senior Liens in the manner deemed
appropriate by YA Global.

b. ABS hereby expressly agrees that in the event of a sale or other disposition
of any of the assets of the Obligors upon terms which YA Global shall determine
to be commercially reasonable, ABS shall not interfere with, delay, or obstruct
such sale or other disposition, and agrees to cooperate with YA Global, and to
provide such consents and other documentation as YA Global may request in
connection therewith.

c. Each of the parties agrees that during the term of this Agreement it will not
exercise its rights to require any other party to marshal the assets of the
Obligors.

4. ABS hereby agrees that YA Global shall have the authority and permission of
ABS to release, discharge, or dissolve the Junior Liens to the extent necessary
in connection with any secured party sale, foreclosure, or other disposition of
all or part of the assets of the Obligor.
 
 

Subordination Agreement ABS.doc  E-2  

 
 
 

--------------------------------------------------------------------------------

 

5. In the event (a) any voluntary or involuntary case or proceeding under any
bankruptcy law with respect to a Obligor, (b) any other voluntary or involuntary
insolvency, reorganization or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
with respect to a Obligor, or with respect to any of such Obligor’s assets,
(c) any liquidation, dissolution, reorganization or winding up of a Obligor,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (d) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of a Obligor (each, an “Insolvency
Proceeding”), is commenced by or against any of the Obligors:

a. ABS hereby agrees that it shall not, until the actual full, final, and
indefeasible payment of the Obligations (irrespective of whether the Obligations
are scheduled to be paid in full as part of an applicable insolvency or
bankruptcy proceeding):

i. seek any relief from, or modification of, the automatic stay as provided in
§362 of the Bankruptcy Code (as defined below) or seek or accept any form of
“adequate protection” under any or all of §362, §363, or §364 of the Bankruptcy
Code, except replacement liens and super-priority administrative expense claims
for diminution of value (the “Priority Claims”), which liens and Priority Claims
shall be subordinated to the Senior Liens and any similar Priority Claims
granted to YA Global in accordance with, and subject to, the terms of this
Agreement;

ii. seek to appoint a trustee or examiner under §1104 of the Bankruptcy Code or
to convert (or support any other person in converting) such case or proceeding
under §1112 of the Bankruptcy Code, in each case without the prior written
consent of YA Global; provided that if YA Global seeks such aforementioned
relief, ABS hereby irrevocably consents thereto and shall join in any such
motion or application seeking such relief if requested by YA Global;

iii. oppose or object (or support any other person in opposing or objecting) to
any “adequate protection” sought by or granted to YA Global;

iv. oppose or object (or support any other person in opposing or objecting) to
the use of any assets of the Obligors constituting cash collateral by any of the
Obligors, unless YA Global shall have opposed or objected to such use of such
cash collateral;

v. oppose or object (or support any other person in opposing or objecting) to
any financing obtained by an Obligor during any Insolvency Proceeding or
otherwise pursuant to any Bankruptcy Law (as defined below), including any such
financing obtained by an Obligor under §364 of the Bankruptcy Code or consisting
of any arrangement for use of cash collateral held in respect of any of the
Obligations or the obligations owed to ABS under §363 of Bankruptcy Code, in
each case or any similar provision of any Bankruptcy Law (a “Post-Petition
Financing”) provided by YA Global, provided, that such Post-Petition Financing
is in such amounts and on such terms and conditions as are consistent with the
Financing Documents and this Agreement (provided, further, that YA Global may
charge an interest rate and such fees as are customary and commercially
reasonable under such circumstances) and (A) with respect to each such
Post-Petition Financing constituting a refinancing of the entire amount of the
Obligations, liens securing such Post-Petition Financing shall be the Senior
Liens and, therefore, the Junior Liens shall be junior and subordinate to such
security interests and liens to the same extent as provided for herein, and (B)
with respect to each such Post-Petition Financing which does not constitute a
refinancing of all Obligations outstanding immediately prior to the commencement
of Insolvency Proceeding, to the extent the security interests and liens
securing the Obligations are subordinated to (or pari passu with) the security
interests and liens securing such Post-Petition Financing, the Junior Liens
shall be junior and subordinate to such security interests and liens securing
such Post-Petition Financing and such Obligations, provided, however, that in
connection with any such Post-Petition Financing, ABS shall have received as
adequate protection of its interests a replacement lien in post-petition assets
of any of the Obligors which shall be junior and subordinate to all security
interests and liens granted to YA Global, whether pursuant to the Post-Petition
Financing or otherwise with the same priorities afforded the security interests
in and to, and liens upon, the assets of the Obligors granted to, or created in
favor of, ABS pursuant to this Agreement;
 
 

Subordination Agreement ABS.doc  E-3  

 
 
 

--------------------------------------------------------------------------------

 
 

 
vi. object (or support any other person in objecting) to (A) the amount of the
Obligations allowed or permitted to be asserted under any Bankruptcy Law or (B)
the extent to which the Obligations are deemed secured claims, including under
§506(a) of the Bankruptcy Code;

vii. oppose or object (or support any other person in opposing or objecting) to
any protection provided to YA Global, including any form of adequate protection
under §362, §363, or §364 of the Bankruptcy Code and the payment of amounts
equal to interest and expenses allowed under §506(b) and (c) of the Bankruptcy
Code to YA Global; and

viii. ABS waives any claim in respect of the obligations owed to it by the
Borrower it may now or hereafter have arising out the election of YA Global, in
an Insolvency Proceeding, of the application of §1111(b) of the Bankruptcy Code.

b. YA Global agrees not to oppose or object (or support any other person in
opposing or objecting) to any “adequate protection” sought by or granted to ABS,
provided that such “adequate protection” is junior and subordinate to all liens
or other forms of “adequate protection” granted to YA Global and is subject to
the same priorities afforded the security interests and liens granted to ABS
pursuant to this Agreement.  YA Global shall not object (or support any other
person in objecting) to (i) the amount of the obligations owed by the Borrower
to ABS allowed or permitted to be asserted under any Bankruptcy Law, or (ii) the
extent to which the obligations owed by the Borrower to ABS are deemed secured
claims, including under §506(a) of Bankruptcy Code.

For the purposes of this Paragraph 5,“Bankruptcy Code” shall mean Title 11 of
the United States Code (11 U.S.C §§ 101 etseq.), and “Bankruptcy Law” shall mean
the Bankruptcy Code, or any similar federal, state, or foreign requirement of
law for the relief of debtors or any arrangement, reorganization, insolvency,
moratorium, assignment for the benefit of creditors, any other marshaling of the
assets and liabilities of the Obligors, or any similar law relating to or
affecting the enforcement of creditors’ rights generally.

6. If ABS shall receive any check, draft, or other payment or funds with respect
to which it is named as payee, and such check, draft, or other payment or funds
represents insurance proceeds of the assets of the Obligors, ABS shall hold the
same in trust for YA Global and shall promptly deliver such check, draft, or
other payment or funds to YA Global in the form received and with all necessary
endorsements thereon.
 
 

Subordination Agreement ABS.doc  E-4  

 
 
 

--------------------------------------------------------------------------------

 

7. YA Global agrees that upon execution of the ABS Forbearance Agreement (as
such term is defined in the ABS Forbearance Agreement), YA Global (a) shall
release its liens and security interests in and to the trademarks specifically
listed on Exhibit “1” attached hereto and incorporate herein by reference, and
(b) authorizes ABS to file a UCC-3 partial release in the form attached hereto
as Exhibit “2” in the appropriate filing office therefor.  ABS represents and
warrants that it has the right to litigate, resolve, and settle any claims of
its bankruptcy Estate, including but not limited to, Post-Confirmation Estate
Claims; and that such claims are vested solely in it as of November 6, 2007,
without the necessity of further Court order, and that its settlement with
CirTran as set forth in this Agreement is duly authorized.  It is expressly
understood that if Bankruptcy Court approval of this Agreement becomes manifest
or is manifest, that (1) ABS shall seek approval of this Agreement in the
Bankruptcy Court, and (2) this Agreement, the ABS Forbearance Agreement, the
Pledge and Security Agreement, the Trademark Agreement, the Claim Assignment
Agreement, and the Stipulation for Judgment shall become void upon the failure
by ABS to receive Bankruptcy Court approval of the Agreement within forty-five
days after written notice of the grounds for the requirement of Bankruptcy Court
approval is provided to ABS by either CirTran or YA Global or YA Global’s
assignee.

8. Unless and until the Obligations are fully, finally, and indefeasibly paid,
ABS agrees it will not, directly or indirectly, take any action to exercise or
enforce any of its rights or remedies (including, without limitation, any rights
under the Junior Lien) against, or to foreclose or otherwise realize on, any
assets of the Obligors.

9. If, at any time after the full, final, and indefeasible payment of the
Obligations, any payments made on account of the Obligations must be disgorged
by YA Global for any reason (including, without limitation, the bankruptcy of
any one or more of the Obligors), this Agreement and the relative rights and
priorities set forth herein shall be automatically reinstated.

10. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
instrument.

11. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws.  The parties hereto further agree that any action between them shall be
heard in Hudson County, New Jersey, and expressly consent to the jurisdiction
and venue of the Superior Court of New Jersey, sitting in Hudson County and the
United States District Court for the District of New Jersey sitting in Newark,
New Jersey for the adjudication of any civil action asserted pursuant to this
Agreement, provided, however, that nothing herein shall prevent YA Global from
enforcing its rights and remedies (including, without limitation, by filing a
civil action) with respect to the assets of the Obligors and/or the Obligors in
any other jurisdiction in which the assets of the Obligors and/or the Obligors
may be located.  THE PARTIES HERETO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
 
 

Subordination Agreement ABS.doc  E-5  

 
 
 

--------------------------------------------------------------------------------

 

12. This Agreement expresses the entire understanding of the parties with
respect to the matters set forth herein and supersedes all prior discussions or
negotiations hereon.  This Agreement may be amended only by written instrument
signed by YA Global and ABS.

13. This Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of and be enforceable by
each of the parties hereto and their respective successors and assigns,
provided, however, that YA Global agrees that if the Obligors are in default of
their payment obligations under the ABS Forbearance Agreement and if YA Global
sells, assigns, conveys, or otherwise transfers the Senior Liens to an Obligor,
or to any party directly or indirectly owned or controlled by an Obligor, or
which is acquiring the Senior Liens in active participation with an Obligor,
without requiring such party to first cure the payment defaults under the ABS
Forbearance Agreement, then ABS shall have the right, but not the obligation, to
immediately terminate the standstill and/or forbearance provisions set forth in
Section 1 of this Agreement and ABS shall be entitled to take all appropriate
action to accelerate, demand, collect, or enforce payment of the Subordinated
Indebtedness.  The termination of the standstill/forbearance provisions of
Section 1 of this Agreement shall not affect, modify, or alter the other
provisions of this Agreement, including, without limitation, the priority of the
Senior Liens over the Junior Liens and YA Global’s rights in connection with the
same, all as set forth in this Agreement.  For the avoidance of doubt, an
assignment of all or part of the Senior Liens shall not give ABS any right to
terminate the standstill/forbearance provisions of Section 1 of this Agreement,
and such provisions will remain in full force and effect, if such assignment is
(a) to a subsidiary or affiliate of YA Global or an existing investor in YA
Global (determined as of the date hereof), (b) to any party other than the
Obligors, or a party directly or indirectly owned or controlled by the Obligors,
or who is acquiring the Senior Liens in active participation with the Obligors,
or (c) made at a time when there is then no existing payment default under the
ABS Forbearance Agreement.

[Remainder of Page Intentionally Left Blank]
 

Subordination Agreement ABS.doc  E-6  

 
 
 

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives as of the day and year first
above written.

YA GLOBAL INVESTMENTS, L.P.,
a Cayman Island exempt limited partnership

By:         Yorkville Advisors, LLC,
its Investment Manager

By: /s/ Troy Rillo
Name: Troy Rillo
Title: Sr. Managing Director

ADVANCED BEAUTY SOLUTIONS, LLC,
a California limited liability company

By: /s/ Jason Dodo
Name: Jason Dodo
 

Subordination Agreement ABS.doc  E-7  

 
 
 

--------------------------------------------------------------------------------

 

 
EXHIBIT “1” TO SUBORDINATION AGREEMENT
 
TRADEMARK REGISTRATIONS

Country
Mark
Date Filed
Date Registered
Serial/Registration Number
United States
True Ceramic Pro
4-9-2004
n/a
78/399698
International
True Ceramic Pro
10-13-2004
10-13-2004
0861761
United States
True Ceramic Pro
4-9-2004
7-1-2008
78/979167

 
EXHIBIT “2” TO SUBORDINATION AGREEMENT
 
Form UCC-3 Partial Release
 

 
(See Attached)
 
 

Subordination Agreement ABS.doc  E-8