SEPARATION AND SEVERANCE AGREEMENT
SEPARATION AND SEVERANCE AGREEMENT
This
Separation and Severance Agreement (“Agreement”) is made and entered into on
January 23, 2009 by and between China Direct, Inc., a Florida corporation, and
its various subsidiaries and affiliates, (hereafter collectively referred to as
the “Company”), and Xxxx Xxxxxx (“Xxxxxx”).
RECITALS
X. Xxxxxx
has been employed by the Company as its President.
X. Xxxxxx
and the Company entered into an employment agreement on August 7, 2008, as
amended (the “Employment Agreement”).
X. Xxxxxx
holds the following securities of China Direct, Inc.
(i) Common
Stock:
4,400,000
shares of China Direct, Inc. common stock, par value, $.0001, (“Common
Stock”)
(ii) Options to purchase
Common Stock:
|
Amount
|
Ex Price
|
Issued
|
Exp.
|
Vest
|
|||||
| 400,000 | $ | 5.00 |
1/1/05
|
1/1/2012
|
1/1/2007
|
||||
| 500,000 | $ | 7.50 |
1/1/05
|
1/1/2013
|
1/1/2008
|
||||
| 500,000 | $ | 10.00 |
1/1/05
|
1/1/2014
|
1/1/2009
|
||||
D. The
parties desire to terminate their relationship on an amicable basis pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in
consideration of the mutual promises, undertakings and releases, receipt of
which is hereby acknowledged as sufficient consideration by both parties, the
parties agree as follows:
1. Recitals. The
above recitals are true, correct, and are herein incorporated by
reference.
2. Resignation
of Employment. Xxxxxx hereby
resigns as President and Director and from any and all other offices or
positions he may have with the Company or any of its subsidiaries or affiliated
companies, to be effective on the date hereof (“Termination Date”).
3. Termination. The Employment
Agreement is permanently terminated effective on the Termination
Date. The Company shall reimburse Xxxxxx pursuant to section 4. D. of
the August 7, 2008 Employment Agreement for expenses incurred up to and
including the Termination Date. In addition Xxxxxx hereby waives his
right to receive all Base Salary, Incentive Compensation, performance bonus, if
any, and additional forms of compensation provided for in the Employment
Agreement whether due or accrued through the Termination Date.
4. Severance
and Benefits. Subject to the conditions set forth herein, the Company and
Xxxxxx agree to the following.
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(a) Xxxxxx’x
obligations under this Agreement are conditioned upon Xxxxxx entering into an
agreement to sell an aggregate of 1,500,000 shares of Common Stock in exchange
for $1,650,000.
(b) On the
Termination Date, the Company shall pay Xxxxxx $165,000 in either cash or Common
Stock, at the option of the Company (the “Severance Shares”). The
number of Severance Shares, if issued in lieu of the cash amount, shall be equal
to the result of dividing $165,000 by the per share closing price of the Common
Stock on the business day immediately following the Company’s filing of a public
announcement disclosing the resignation of Xxxx Xxxxxx. The Severance
Shares can be sold by Xxxxxx on a daily basis at no more than 10% of the daily
trading volume of the Common Stock at the Volume-Weighted Average Price (“VWAP”)
of the Common Stock. The Severance Shares shall be issued pursuant to
the Company’s 2008 Non-Executive Stock Incentive Plan and are subject to
approval of the Compensation Committee of the Company’s board of
directors. The award of the Severance Shares are intended to be
exempt from Section 16(b) of the Securities Exchange Act of 1934 (the “Act”)
pursuant to Rule 16b-3 of the Act.
(c) The
Company shall retain Xxxxxx as a consultant pursuant to consulting agreement
mutually agreeable to the Company and Xxxxxx to be entered into upon execution
of this Severance Agreement.
(d) Commencing
on the Termination Date and continuing until January 31, 2010, the Company shall
pay for all insurance premiums for Xxxxxx to participate in the Company’s health
care and dental insurance plans (the “Benefit Plans”). Should Xxxxxx
elect not to participate in the Benefit Plans, the Company will reimburse Xxxxxx
in cash for the expense incurred in participating in another health care and
dental insurance plan procured by Xxxxxx. The Company’s obligation to
reimburse Xxxxxx is limited to the Company’s cost of providing benefits to
Xxxxxx under the Benefit Plans.
(e) Commencing
on the Termination Date, Xxxxxx will enter into the Lock-Up Agreement attached
to this Severance Agreement as Exhibit A (the “Lock-Up
Agreement”). Xxxxxx hereby agrees to forfeit the following options to
purchase shares of the Company’s Common Stock:
Options to purchase Common
Stock:
|
Amount
|
Ex Price
|
Issued
|
Exp.
|
Vest
|
|
|
400,000
|
$ 5.00
|
1/1/05
|
1/1/2012
|
1/1/2007
|
|
|
500,000
|
$ 7.50
|
1/1/05
|
1/1/2013
|
1/1/2008
|
|
|
500,000
|
$ 10.00
|
1/1/05
|
1/1/2014
|
1/1/2009
|
(f) So long
as the Company is a reporting company under the Act, the Company agrees to
maintain a current registration statement covering the resale of the Severance
Shares. The Company shall maintain the effectiveness of the current
registration statement covering the shares of Common Stock issuable pursuant to
the stock options to be retained by Xxxxxx. Following the issuance of
shares pursuant to the exercise of such stock options, the Company will have no
obligation to maintain a registration statement covering those
shares.
(g) At the
request of the Company, Xxxxxx, during normal business hours, will reasonably
assist the Company in furnishing, to the extent he has or can ascertain,
documents and information for any filings required by the Company with the state
or federal authorities and in responding to other inquiries on matters handled
during his employment with the Company. The
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Company
shall reimburse Xxxxxx in cash for all preapproved expenses incurred by Xxxxxx
in the performance of this Section 4 (i).
(h) The
Company agrees that if Xxxxxx is made a party, is threatened to be made a party,
to any action, suit or proceeding, whether civil, criminal, administrative, or
investigative (a “Proceeding”), by reason of the fact that Xxxxxx is or was an
employee of the Company, is or was a consultant to the Company, or is or was
serving at the request of the Company as an employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, including
service with respect to clients of the Company, whether or not the basis of such
Proceeding is Xxxxxx’x alleged action in an official capacity while serving as
an employee, agent or consultant, Xxxxxx shall be indemnified and held harmless
by the Company, to the same extent as the officers and directors of the Company,
to the fullest extent legally permitted against all cost, expense, liability,
and loss (including, without limitation, attorney’s fees, judgments, fines,
ERISA excise taxes or other liabilities or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by Xxxxxx in connection
therewith, and such indemnification shall continue as to Xxxxxx even if he has
ceased to be an employee or agent of the Company or other entity and shall inure
to the benefit of Xxxxxx’x heirs, executors, and administrators. In
return for the above provision, Xxxxxx promises to cooperate with the Company at
its expense in his or the Company's defense of any actions taken by private
parties and/or federal or state governmental bodies against the
Company. Such cooperation includes, but is not limited to, travel to
the State of Florida at the Company’s expense, for purposes of deposition and/or
trial, if necessary.
(i) The
Company shall pay in cash, as and when due, any and all attorneys’ fees and
costs incurred by Xxxxxx in connection with any dispute or settlement arising
from his affiliation with the Company, as an employee or as a consultant, or as
an employee or agent of another corporation, partnership, joint venture, trust,
or other enterprise, including service with respect to clients of the Company,
whether or not the basis of such Proceeding is Xxxxxx’x alleged
action. Xxxxxx shall be indemnified and held harmless by the Company,
to the same extent as the officers and directors of the Company, to the fullest
extent legally permitted.
(j) Xxxxxx
acknowledges that, in consideration of the terms of this Agreement, the Company
is not obligated to pay him any other severance pay and Xxxxxx agrees that the
amounts set forth above are all Xxxxxx is to receive from the
Company. Such severance pay is full and complete satisfaction of all
of the Company’s obligations to Xxxxxx, including all obligations under the
Employment Agreement and constitutes consideration for the releases of Xxxxxx in
this Agreement.
5. Return of
Property. Company
acknowledges that Xxxxxx has returned to
the Company, in good condition, all property, documentation and materials of the
Company in Xxxxxx’x possession. Xxxxxx will return to the Company,
upon request from the Company, any property, documentation and materials as may
be requested by the Company.
6. Non-Disparagement. The Company and Xxxxxx
further agree that they shall not make any disparaging, denigrating, critical or
untrue statements (public or private) about the Company, its management or about
any other employee of the Company, its technology, products, customers,
suppliers, business or prospects or about Xxxxxx. In addition, Xxxxxx
shall not make any public statements about the Company, its management or about
any other employee of the Company, its technology, products, customers,
suppliers, business or prospects or about Xxxxxx. It is agreed and
understood that any breach of this paragraph by Xxxxxx or the Company would be
material to the other.
7. General
Releases and Voluntary Waiver of Rights.
(a) Except
for the obligations created by or arising out of this Agreement or any future
consulting agreement between the Company and Xxxxxx, effective on or after the
Termination Date, Xxxxxx (and his heirs, successors and assigns) waives, and
releases and forever discharges Company and
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its
shareholders, directors, officers, successors, assigns, transferees, employees,
representatives and agents, both current and former (the “Company Indemnitees”)
from all claims, rights, and causes of action, in law or in equity, or any kind
whatsoever, which has or may have against the Company Indemnitees, as of this
date whether such claims, right or causes of action are known or later
discovered. The claims, rights and causes of action covered by this
waiver and release include, but are expressly not limited to, any claim, right
or cause of action based on any federal, state or local law, constitution,
statute or ordinance, including without limitation, Title VII of the Civil
Rights Act of 1964, as amended; the Civil Rights Acts of 1866 and 1871,
the Equal Pay Act of 1963, as amended; the Fair Labor Standards Act of 1938, as
amended; the Family and Medical Leave Act of 1993, as amended; the Age
Discrimination in Employment Act of 1967, as amended; the Rehabilitation Act of
1973, as amended; Employee Retirement Income Security Act of 1974, as
amended; the Americans With Disabilities Act of 1990; as amended; the
Older Workers Benefit Protection Act; the Occupational Safety and Health Act of
1970, as amended; the National Labor Relations Act of 1935, as amended
(including the Labor Management Relations Act of 1947, as amended); the
Uniformed Services Employment and Re-employment Rights Act, as amended; the
Immigration Reform and Control Act of 1986; the Fair Credit Reporting Act, as
amended; the Employee Polygraph Protection Act of 1988; the Florida Civil Rights
Act of 1992, as amended; Fla. Stat. Section 112.3187, 440.15, 440.205,760.50,
and 540.08; Fla. Stat. Ch. 295, 447, 448, 768 and 770; and any other claim right
or cause of action found in tort (including negligence), contract, public,
policy, estoppel or any other common law or equitable basis of action except
those which may not lawfully be waived. Xxxxxx specifically
acknowledges that he has been advised that he should consult with an attorney
concerning his rights and the signing of this Release and has done so.
(b) Except
for the obligations created by or arising out of this Agreement or any future
consulting agreement between the Company and Xxxxxx, effective on the
Termination Date, the Company, and the Company’s subsidiaries and affiliated
companies, do hereby release, acquit, satisfy and forever discharge and covenant
not to xxx Xxxxxx or Xxxxxx'x descendants, heirs, successors and assigns, and
each of them, past or present, from any and all manner of action, causes of
action, rights, liens, agreements, contracts, covenants, obligations, suits,
claims, debts, dues, sums of monies, costs, expenses, attorneys' fees,
judgments, orders and liabilities, accounts, covenants, controversies, promises,
damages, of whatever kind and nature in law or equity or otherwise whether now
known or unknown, including specifically but not limited to, any and all claims
arising out of such employment relationship Xxxxxx had with the Company and the
transactions and relationships described herein.
(c) Xxxxxx
does not and will not seek reinstatement, future employment or return to active
employment status at Company and further acknowledges that he has no rights to
such reinstatement, future employment or return to active status, unless
formally requested by the Company or the Board of Directors.
(d) This
Agreement may not be revoked. In the event that either party
initiates a legal proceeding and/or arbitration against the other party which
arises from or relates to this Agreement and/or Xxxxxx’x employment by the
Company, the prevailing party shall be entitled to recover reasonable attorneys
fees.
8. Non-Admissions. The Company and
Xxxxxx agree that neither this Agreement nor the consideration given shall be
construed as an admission of any wrongdoing or liability by the Company or
Xxxxxx, and that all such liability or wrongdoing is expressly
denied.
9. Confidentiality. In
the course of serving as an employee of the Company, the Company has disclosed
to Xxxxxx, and Xxxxxx may otherwise have obtained knowledge of or access to,
trade secrets and other proprietary and confidential information concerning the
Company, the Company products, financial condition, services, research and
development plans, and other matters pertaining to the Company’s business
(“Confidential Information”). Xxxxxx agrees to treat and hold all
Confidential
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Information
as secret and confidential, and to apply strict standards of care to maintain
the secrecy of the Confidential Information. In this regard, Xxxxxx
agrees not to copy or reproduce any Confidential Information and not to disclose
the contents of any Confidential Information to any person or entity, other than
officers and directors of the Company or with their written
permission. Xxxxxx further agrees to return to the Company written or
other copies (including electronic media containing Confidential Information) of
any and all Confidential Information in Xxxxxx’x possession. Further,
Xxxxxx and Company shall not directly or indirectly disclose, or cause to be
disclosed, any information whatsoever regarding the terms of this Agreement to
anyone except to each party's immediate family members, accountants, legal or
tax advisor(s), or as required by law. This Agreement shall not be used as
evidence in any proceeding, except a proceeding to enforce the terms of this
Agreement. The provisions of this Section 9 shall not apply to any Confidential
Information that Xxxxxx is obligated by law to disclose to any court or any
federal or state government agency; provided, however, that in the event
disclosure is required by law Xxxxxx shall provide the Company with prompt
notice of such requirement so that the Company may seek an appropriate
protective order prior to such required disclosure by Xxxxxx.
10. Anti-Coercion. Each
of the Parties hereto has entered into this Agreement without undue influence,
fraud, coercion, duress, misrepresentation, or restraint having been imposed
upon them by any other party, and further acknowledges that each party had the
opportunity to be represented by counsel of their own selection.
11. Interpretation
of Release. For the purposes
of interpretation and construction of this Agreement, this Agreement shall be
deemed to have been drafted by the Company and by Xxxxxx.
12. Notices. Any notice
required or permitted to be given under the terms of this Agreement shall be
sufficient if in writing and if sent postage prepaid by registered or certified
mail, return receipt requested; by overnight delivery; by courier; or by
confirmed telecopy, in the case of Xxxxxx to the business or residence as shown
on the records of the Company, or in the case of the Company to its principal
office or at such other place as it may designate.
13. Entire
Agreement. This Agreement
constitutes the entire agreement between the parties and shall not be modified,
altered, or discharged, except by a writing signed by each of the parties
hereto.
14. Governing
Law, Jurisdiction and Venue. This Agreement
shall be governed by the laws of the State of Florida. The Parties
acknowledge that this Agreement contains provisions, which are enforceable in
the State of Florida, and all Parties consent to the personal jurisdiction of
the State of Florida and County of Broward. However, both parties agree to waive
any and all rights to trial or litigation of any dispute arising out of this
agreement, and to submit to final and binding arbitration any and all claims,
controversies and/or disputes of any nature arising out of or related in any way
to this Agreement or its enforcement. Said arbitration shall be conducted
pursuant to the Employment Arbitration and Mediation Procedures currently in
effect with the American Arbitration Association, the designated arbitral
forum.
15. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
Agreement.
16. Waiver of
Breach - Effect. No waiver or any
breach of any term or provision of this Agreement shall be construed to be, nor
shall be, a waiver of any other breach of this Agreement. No waiver
shall be binding unless in writing and signed by the Party waiving the
breach.
17. Full
Understanding and Voluntary Acceptance. In entering into
this Agreement, the parties represent that they have relied upon the advice of
their attorneys or have chosen to enter into this Agreement without the
assistance of counsel based upon their understanding of the terms
hereof. The terms of this Agreement have been completely read and
explained to them by their attorneys and/or they have
reviewed the terms hereof in complete detail and that the terms are fully
understood and voluntarily accepted by them.
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18. Headings. The headings in
this Agreement are for convenience only and shall not be used to interpret or
construe its provisions.
XXXXXX
ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT, THAT HE HAS BEEN GIVEN AMPLE
OPPORTUNITY TO REVIEW IT AND TO CONSULT WITH A REPRESENTATIVE OR ATTORNEY OF
XXXXXX’X CHOOSING CONCERNING ITS TERMS. XXXXXX FURTHER ACKNOWLEDGES
THAT HE UNDERSTANDS THE TERMS AND CONDITIONS OF THIS AGREEMENT AND IS
VOLUNTARILY ENTERING INTO IT WITH THE COMPANY.
IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first above
written.
|
|
||||
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By:
/s/Xxxxx Xxxx
|
/s/
Xxxx Xxxxxx
|
|||
|
Yuejian
(Xxxxx) Xxxx, Chief Executive Officer, Chairman of the Board of
Directors
|
Xxxx
Xxxxxx
|
|||
|
Dated: January 23,
2009
|
Dated: January 23, 2009 |
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Exhibit
A
Lock-Up
Agreement
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