CHINA DIRECT, INC. Lock-Up Agreement January 23, 2009
January
23, 0000
Xxxxx
Direct, Inc.
000
Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx
Xxxxx, XX 00000
Re: Xxxx Xxxxxx/China Direct, Inc.
– Lock-Up
Agreement
Dear
Sirs:
This
Lock-Up Agreement (“Lock-Up Agreement”) is dated as of January 23, 2009 by and
among China Direct, Inc. (the “Company”) and Xxxx Xxxxxx (“Xxxxxx”) with respect
to the sale of the Company’s common stock, $.0001 par value per share (the
“Common Stock”) owned by Xxxxxx.
In
connection with the January 23, 2009 Separation and Severance Agreement entered
into by and between the Company and Xxxxxx (the “Separation Agreement”), Xxxxxx
agrees that, commencing on the date hereof and ending when Xxxxxx no longer owns
any shares of the Company’s Common Stock (the “Lock-Up Period”), except for
Excepted Sales, as defined herein, Xxxxxx will not sell, offer to sell, make any
short sale or otherwise dispose of any shares of the Common Stock owned by
Xxxxxx (including Common Stock held indirectly or as a custodian by
Xxxxxx).
The term
“Excepted Sales” for purposes of this Lock-Up Agreement shall mean the
following:
(i) For
a period commencing on the date hereof and concluding on the 90 day anniversary
of this Lock-Up Agreement (the “Private Transaction Lock-Up Period”), Xxxxxx may
offer and sell up to a maximum of 700,000 shares of Common Stock plus the
Severance Shares as that term is defined in the Separation Agreement (the
“Private Transaction Shares”) in one or more private
transactions. Xxxxxx agrees not to remove the restrictive legend on
the Private Transaction Shares pursuant to Rule 144 under the Securities Act of
1933 or any other applicable rule or regulation until a definitive and binding
agreement to sell those shares in a private transaction has been entered into
between Xxxxxx and the buyer of such shares; and
(ii) A
number of shares of the Common Stock owned by Xxxxxx in amounts that do not
exceed 10% of the daily trading volume of the Company’s Common Stock at the
Volume-Weighted Average Price (VWAP) of the Common Stock.
Xxxxxx agrees that any breach of this
Lock-Up agreement will entitle the Company to terminate the January 23, 2009
Consulting Agreement entered into by and among the Company and
Xxxxxx. In addition, in the event Xxxxxx breaches any of the terms of
this Lock-Up Agreement, and if requested by the Company, Xxxxxx shall pay to the
Company an amount equal to 50% of the proceeds from such sales in violation of
this Lock-Up Agreement as liquidated damages. If legal and collection
actions are required to enforce the terms of this Lock-Up Agreement, Xxxxxx
shall be liable for legal fees and collections fees incurred by the Company in
connection with such action. In no event shall the Company exercising
its rights under this section be precluded by the exercise of such rights from
pursuing, subject to the terms of this Agreement and applicable law, any cause
of action or other claim it may then or at any time thereafter have against
Xxxxxx in respect of any breach or default by Xxxxxx hereunder.
Notwithstanding
the foregoing, Xxxxxx may transfer the Common Stock he owns (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein or (ii) to any trust for the direct or indirect
benefit of Xxxxxx or the immediate family of Xxxxxx, provided that the trustee
of the trust agrees to be bound in writing by the restrictions set forth herein,
and provided further that any such transfer shall not involve a disposition for
value. For purposes of this Lock-Up Agreement, “immediate family”
shall mean any relationship by blood, marriage or adoption, not more remote than
first cousin. Xxxxxx now has, and, except as contemplated by clauses
(i) and (ii) above, for the duration of this Lock-Up Agreement will have, good
and marketable title to the Common Stock, free and clear of all liens,
encumbrances, and claims whatsoever. Xxxxxx also agrees and consents
to the entry of stop transfer instructions with the Company’s transfer agent and
registrar against the transfer of Common Stock owned by Xxxxxx except in
compliance with the foregoing restrictions. In addition, Xxxxxx may
sell such additional shares of the Common Stock he owns as may be approved in
writing by the Company from time to time in the Company’s absolute
discretion.
Xxxxxx
understands and agrees that this Lock-Up Agreement is irrevocable and shall be
binding upon Xxxxxx’x heirs, legal representatives, successors, and
assigns.
This
Lock-Up Agreement may be executed in two counterparts, each of which shall be
deemed an original but both of which shall be considered one and the same
instrument.
This
Lock-Up Agreement will be governed by and construed in accordance with the laws
of the State of Florida, without giving effect to any choice of law or
conflicting provision or rule that would cause the laws of any jurisdiction
other than the State of Florida to be applied. In furtherance of the
foregoing, the internal laws of the State of Florida will control the
interpretation and construction of this Lock-Up Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
Very
truly yours,
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/s/
Xxxx Xxxxxx
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Xxxx
Xxxxxx
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Agreed to
and Acknowledged:
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By:
/s/Xxxxx Xxxx
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Name:
Yuejian (Xxxxx) Xxxx
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Title: Chief
Executive Officer, Chairman of the Board of Directors
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