SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported) January 23, 2009
CHINA
DIRECT, INC.
(Exact
name of registrant as specified in its charter)
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Florida
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001-33694
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13-3876100
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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431
Fairway Drive, Suite 200, Deerfield Beach, Florida 33441
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (954) 363-7333
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
Item
5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Appointment
of I. Andrew Weeraratne as Chief Financial Officer and Principal Financial and
Accounting Officer
Effective January 26, 2009, the Board
of Directors of China Direct, Inc. (the “Company”) approved the appointment of
I. Andrew Weeraratne as its Chief Financial Officer and Principal Financial and
Accounting Officer. Mr. Weeraratne succeeded Ms. Jenny Liu, the
Company’s Vice President of Finance. Ms. Liu will remain with the
Company, supervising the expansion of its accounting staff in
China.
From February 2000 to January 2009,
Mr. Weeraratne was the investment officer for Passerelle Corp., a private
investment company. From August 2005 to December 2008 Mr. Weeraratne
acted as a financial consultant working in a variety of industries including
work with the Embassy of the United States of America in Iraq as a financial
advisor to form an Iraqi Accounting Association to introduce International
Accounting Standards to Iraq as part of a plan to privatize State owned
enterprises after the Iraq war. From December 1998 to February 2000,
Mr. Weeraratne was the Chief Financial Officer of National Lampoon, Inc.
(formerly known as J2 Communications), a provider of branded comedic
content. From November 1996 to December 1998, Mr. Weeraratne was the
Controller for Beachport Entertainment Corp., a provider of family entertainment
and sporting events and television programming. Mr. Weeraratne
received a Bachelors of Science Degree in Accounting from Jones College in
1980 and graduated in 1976 from Tottenham College in London,
England. He is licensed as a Certified Public Accountant in
Florida.
Mr.
Weeraratne will receive a salary of $50,000 per year in cash plus $12,500 per
month in shares of the Company’s common stock, of which $5,000 per month will be
in the form of registered shares of common stock and $7,500 will be in the form
of restricted common stock (collectively referred to as the “Stock
Award”). All shares comprising the Stock Award will be issued under
the Company’s 2008 Non-Executive Stock Incentive Plan and will be issued within
10 days of the end of each monthly period during the term of employment (the
Award Date”). The restricted common stock will vest 100% 12 months
after each Award Date and will be subject to the terms and conditions of the
Company’s restricted stock award agreement as approved by the Company’s
Compensation Committee of the Board of Directors. The number of
shares of the Company’s common stock to be issued under the Stock Award will be
computed by dividing $12,500 by the closing price of the Company’s common stock
on the last business day of each full month over the 12 month period after the
Effective Date. In addition, Mr. Weeraratne is entitled to
participate in the Company’s health benefit plan. Either the Company
or Mr. Weeraratne may terminate Mr. Weeraratne’s employment at will without
penalty.
Appointment
of Philip Y. Shen, Ph.D. as a Director
Effective
January 26, 2009, the Company's Board of Directors, in accordance with its
bylaws, appointed Philip Y. Shen, Ph.D. to the Board as an independent director
to hold office until the next annual meeting of stockholders and until his
successor is duly elected and qualified or until his resignation or
removal.
Dr. Shen
possesses three decades of high level experience in international sales and
marketing, manufacturing, mergers/acquisitions, cross border investment,
combined with his cultural background and fluency in Chinese
dialects. Dr. Shen has held numerous positions with Leggett and
Platt, Inc. (“Leggett and Platt”), a Fortune 500 Company, for more than the past
20 years until his retirement in 2008. Leggett and Platt is a
diversified manufacturer of a broad variety of engineered components and
products for customers worldwide. Prior to his retirement at Leggett
and Platt, Dr. Shen held the position of president of its Asia Pacific
operations where he was responsible for business development, sales and
marketing, sourcing and manufacturing, mergers and acquisitions, licensing and
cross-cultural negotiations in the company’s Asia Pacific
region. Since his retirement in 2008, Dr. Shen has been engaged in
international consulting representing clients in the area of cross-border
investment and marketing. In addition, since 2004, Dr. Shen has
published a monthly publication, China Insights, which reports
on a variety of topics important to business development and bi-directional
trade. Dr. Shen earned a Ph.D. degree in biochemistry from Western
Michigan University in 1971.
Dr. Shen
will receive $5,000 per quarter and $750 for each Board meeting he attends
in-person. Additionally, upon election to the Board effective on
January 26, 2009, the Board granted Dr. Shen 4,000 shares of the Company’s
restricted common stock. The restricted common stock will vest on
April 26, 2009 but only if Dr. Shen is still a director of the Company at the
time of vesting. The shares of restricted stock are eligible for the
payment of dividends, if the Board were to declare dividends on the Company’s
common stock. The grant of restricted stock is made in addition to
Dr. Shen’s cash retainer and meeting attendance fees.
Appointment
of Mr. Yuwei Huang as a Director and Executive Vice President -
Magnesium
Effective
January 26, 2009, the Company's Board of Directors, in accordance with its
bylaws, appointed Mr. Yuwei Huang as a director to hold office until the next
annual meeting of stockholders and until his successor is duly elected and
qualified or until his resignation or removal. In addition, Mr. Huang
has been appointed as Executive Vice President of the Company’s magnesium
segment. The Company believes that Mr. Huang’s appointments will
further strengthen its overall corporate decision making capabilities. Mr. Huang
has substantial expertise in magnesium production and distribution and is a
pioneer in the magnesium industry in China bringing a wealth of knowledge to the
Company’s senior management level.
Mr.
Huang, has served as Chief Executive Officer of the Company’s subsidiary,
Taiyuan Changxin Magnesium Co., Ltd. (“Chang Magnesium”) since June
2006. Mr. Huang also serves as General Manager of Taiyuan YiWei
Magnesium Industry Co., Ltd. since founding the company in 1999 and serves in
various positions with its affiliated entities including Vice Chairman of Shanxi
Golden Trust YiWei Magnesium Industry Co., Ltd. since 2002, Vice Chairman of
Taiyuan Qingcheng YiWei Magnesium Industry Co., Ltd. since 2001, Vice Chairman
and General Manager of Taiyuan Minwei Magnesium Industry Co., Ltd. since 2000,
General Manager of Taiyuan YiWei Magnesium Factory since 1998 and Chairman of
Shangxi NiChiMen YiWei Magnesium Co., Ltd. since 1994. Taiyuan YiWei
Magnesium Co., Ltd., a minority owner of Chang Magnesium, owns interests in
seven subsidiary magnesium factories, a magnesium alloy factory and a magnesium
powder desulphurization reagent factory, all located in China.
Mr.
Haung, who is an executive officer of the Company, will not be paid any
compensation for his services as a member of the Board of
Directors.
Resignation
of Marc Siegel as President and a Director
On
January 23, 2009, in concert with the aforementioned additions, Mr. Marc Siegel
resigned as president and a director of the Company. Mr. Siegel’s
resignation was not the result of any disagreement with the Company on any
matter relating to the Company’s operations, policies or practices.
On
January 23, 2008, the Company entered into a consulting agreement with Mr.
Siegel whereby Mr. Siegel will provide advice relating to the Company’s client
consulting companies regarding their capitalization; alternative financing
structures and arrangements and potential sources of investment capital; assist
in developing appropriate acquisition criteria and identifying target
industries; identify, evaluate, structure and provide advice in connection with
potential mergers and acquisitions, divestitures, spin-offs, joint ventures and
other corporate transactions; assist in evaluating and make recommendations
concerning their relationships among various lines of business and potential
areas for business growth; and provide such other services upon which Mr. Siegel
and the Company may mutually agree.
The term
of the consulting agreement begins on January 23, 2009 and terminates on
December 31, 2009. As compensation for his services, the Company will
pay Mr. Siegel $120,000 in either cash or shares of the Company’s common stock,
$.0001 par value per share (the “Common Stock”), at the option of the Company
(the “Consulting Shares”). The number of Consulting Shares, if issued
in lieu of the cash amount, will be equal to the result of dividing $120,000 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 Mr. Siegel (the “Valuation Date”). The Consulting
Shares will be payable in four equal installments payable on March 31, 2009,
June 30, 2009, September 30, 2009 and December 31, 2009. The
Severance Shares will be issued pursuant to the Company’s 2008 Non-Executive
Stock Incentive Plan and were approved by 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. In the event the
Company elects to pay Mr. Siegel in cash, such cash payments will be made
quarterly as follows: $30,000 on March 31, 2009, $30,000 on or before June 30,
2009, $30,000 on or before September 30, 2009, and $30,000 on or before December
31, 2009.
In
addition, on January 23, 2008, the Company entered into a separation agreement
with Mr. Siegel in connection with his resignation as President of the
Company. Pursuant to the separation agreement, Mr. Siegel will
receive a one-time award of $165,000 in shares of the Company’s common stock
valued at the Valuation Date. Mr. Siegel waived his annual base
salary provided for in his employment agreement from October 1, 2008 through
January 23, 2009 and the incentive compensation including bonus, if any, due in
2008. In addition, Mr. Siegel will be entitled to benefits under the
Company’s health care and dental insurance plans (the “Benefit Plans”) for a
period of 12 months. The separation agreement also includes a mutual
non-disparagement clause and a general release of any claims against the Company
by Mr. Siegel. In addition, the Company agreed to purchase 1,500,000
shares of its Common Stock owned by Mr. Siegel at an aggregate purchase price of
$1,650,000 pursuant to the Company’s stock repurchase program approved on
September 10, 2008.
As part
of the severance agreement, Mr. Siegel entered into a lock-up agreement whereby
he agreed to limit the number of shares of Common Stock he may sell, offer to
sell, make any short sale or otherwise dispose of any shares of the Common Stock
he owns directly or indirectly as a custodian (the “Lock-Up Agreement”) as
follows: (i) for a 90 period from the date of the Lock-Up Agreement (the
“Private Transaction Lock-Up Period”), he may offer and sell up to a maximum of
700,000 shares of the Company’s Common Stock plus the shares of Common Stock he
receives pursuant to the severance agreement (the “Private Transaction Shares”)
in one or more private transactions; and (ii) until Mr. Siegel no longer owns
any shares of the Common Stock, a number of shares of the Common Stock owned by
Mr. Siegel 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
stock.
The
Lock-Up Agreement provides that in the event of a breach of the agreement, the
Company will be entitled to terminate the January 23, 2009 Consulting Agreement
entered into by and among the Company and Mr. Siegel. In addition, in
the event Mr. Siegel breaches any of the terms of the Lock-Up Agreement, and if
requested by the Company, Mr. Siegel will pay to the Company an amount equal to
50% of the proceeds from such sales in violation of the Lock-Up Agreement as
liquidated damages. The
Lock-Up Agreement permits Mr. Siegel to transfer the Company’s 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 Mr. Siegel or the immediate family
of Mr. Siegel, provided that the trustee of the trust agrees to be bound in
writing by the restrictions set forth in the Lock-Up Agreement.
This
summary of the separation and severance agreement, consulting agreement, stock
purchase agreement and lock-up agreement is qualified in its entirety by
reference to these agreements which are attached as exhibits to this Form 8-K
and incorporated herein by reference.
Amendment
to Yuejian (James) Wang, Ph.D.’s Employment Agreement
On
January 23, 2009, Yuejian (James) Wang, Ph.D, our Chief Executive Officer
entered into an amendment to his August 7, 2008 employment agreement with the
Company. The January 23, 2009 amendment waives the annual base salary provided
for in the employment agreement from October 1, 2008 through December 31, 2008
and the incentive compensation including bonus, if any, due in 2008. All other
terms and conditions of the employment agreement remains in full force and
effect.
Item
7.01 Regulation FD Disclosure
On
January 26, 2009, the Company issued a press release announcing the appointment
of Dr. Shen and Mr. Huang as directors, the appointment of Mr. Weeraratne as
Chief Financial Officer and the resignation of Mr. Siegel. A copy of
the press release is attached hereto as Exhibit 99.1 and incorporated by
reference herein.
The
information in this item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
otherwise subject to the liability of that section, and shall not be
incorporated by reference into any registration statement or other document
filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such
filing.
Item
9.01 Financial Statements and Exhibits.
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(d)
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Exhibits:
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10.1
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Consulting
Agreement dated January 23, 2006 between China Direct, Inc. and Marc
Siegel.
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10.2
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Separation
and Severance Agreement dated January 23, 2006 between China Direct, Inc.
and Marc Siegel.
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10.3
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Stock
Purchase Agreement dated January 23, 2006 between China Direct, Inc. and
Marc Siegel.
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10.4
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Lock-Up
Agreement dated January 23, 2006 between China Direct, Inc. and Marc
Siegel.
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99.1
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Press
release dated January 26, 2009 (furnished
herewith).
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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CHINA DIRECT,
INC. |
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Date: January 26, 2008 |
By:
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/s/
Yuejian Wang
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Yuejian
(James) Wang,
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Chief
Executive Officer
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