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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 Marc Siegel (“Siegel”).

RECITALS

A.           Siegel has been employed by the Company as its President.
 
B.           Siegel and the Company entered into an employment agreement on
August 7, 2008, as amended (the “Employment Agreement”).
 
C.           Siegel 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.  Siegel 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 Siegel pursuant
to section 4. D. of the August 7, 2008 Employment Agreement for expenses
incurred up to and including the Termination Date.  In addition Siegel 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 Siegel agree to the following.

 
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           (a) Siegel’s obligations under this Agreement are conditioned upon
Siegel 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 Siegel $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 Marc Siegel.  The
Severance Shares can be sold by Siegel 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 Siegel as a consultant pursuant to consulting
agreement mutually agreeable to the Company and Siegel 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 Siegel to participate in
the Company’s health care and dental insurance plans (the “Benefit
Plans”).  Should Siegel elect not to participate in the Benefit Plans, the
Company will reimburse Siegel in cash for the expense incurred in participating
in another health care and dental insurance plan procured by Siegel.  The
Company’s obligation to reimburse Siegel is limited to the Company’s cost of
providing benefits to Siegel under the Benefit Plans.
 
(e) Commencing on the Termination Date, Siegel will enter into the Lock-Up
Agreement attached to this Severance Agreement as Exhibit A (the “Lock-Up
Agreement”).  Siegel 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 Siegel.  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, Siegel, 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 Siegel in cash for all preapproved expenses incurred by
Siegel in the performance of this Section 4 (i).
 
(h) The Company agrees that if Siegel 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
Siegel 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 Siegel’s alleged action in an official
capacity while serving as an employee, agent or consultant, Siegel 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 Siegel in connection therewith, and such indemnification shall
continue as to Siegel even if he has ceased to be an employee or agent of the
Company or other entity and shall inure to the benefit of Siegel’s heirs,
executors, and administrators.  In return for the above provision, Siegel
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 Siegel 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 Siegel’s
alleged action.  Siegel 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) Siegel acknowledges that, in consideration of the terms of this Agreement,
the Company is not obligated to pay him any other severance pay and Siegel
agrees that the amounts set forth above are all Siegel is to receive from the
Company.  Such severance pay is full and complete satisfaction of all of the
Company’s obligations to Siegel, including all obligations under the Employment
Agreement and constitutes consideration for the releases of Siegel in this
Agreement.
 
5.           Return of Property.  Company acknowledges that Siegel has returned
to the Company, in good condition, all property, documentation and materials of
the Company in Siegel’s possession.  Siegel 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 Siegel 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 Siegel.  In addition, Siegel 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 Siegel.  It is agreed and understood that any breach of this
paragraph by Siegel 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 Siegel,
effective on or after the Termination Date, Siegel (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.  Siegel 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 Siegel,
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 sue Siegel or Siegel's 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
Siegel had with the Company and the transactions and relationships described
herein.
 
(c)           Siegel 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 Siegel’s employment by the
Company, the prevailing party shall be entitled to recover reasonable attorneys
fees.
 
8.           Non-Admissions.  The Company and Siegel agree that neither this
Agreement nor the consideration given shall be construed as an admission of any
wrongdoing or liability by the Company or Siegel, 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 Siegel, and Siegel 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”).  Siegel
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, Siegel
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.  Siegel
further agrees to return to the Company written or other copies (including
electronic media containing Confidential Information) of any and all
Confidential Information in Siegel’s possession.  Further, Siegel 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 Siegel 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 Siegel 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 Siegel.
 
 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 Siegel.
 
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 Siegel 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.
 
SIEGEL 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 SIEGEL’S CHOOSING CONCERNING ITS TERMS.  SIEGEL 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.
 

 
China Direct, Inc.
   
 
 
By: /s/James Wang
   
/s/ Marc Siegel
 
Yuejian (James) Wang, Chief Executive Officer, Chairman of the Board of
Directors
   
Marc Siegel
 
Dated:  January 23, 2009
    Dated:  January 23, 2009  

 
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Exhibit A

Lock-Up Agreement

 
 
 
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