<PAGE>
--------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) May 18, 1996
------------
CHINA INDUSTRIAL GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado
- -------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-16365 84-0974043
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
Suite 2101-2 Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (8522) 877-3857
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 18, 1996, China Industrial Group, Inc. (The "Registrant") has
entered into a stock purchase agreement (the "Agreement") with Victoria
Montreux, S.A., to acquire Cashmere Holdings Limited, a British Virgin Islands
corporation ("CARE"). Under the terms of the Agreement, the Registrant acquired
all of the issued and outstanding 50,000 shares of CARE, par value $1.00 per
share from Victoria Montreux S.A., the sole shareholder of CARE, in exchange for
31,250 shares of Series D Preferred Stock of the Registrant.
CARE is a manufacturer of cashmere products with production facilities
located in the People's Republic of China, with total assets of approximately
$130,000,000, based upon CARE's unaudited financial statements dated as of
December 31, 1995. The Registrant will continue to use the facilities of CARE
for production and manufacture of cashmere. The acquisition of CARE will
enable the Registrant to change the focus of its primary operations from
distribution to manufacturing of products and to capture the cashmere markets
both in China and oversees at the time of the high demand for cashmere products
in both markets.
The Registrant will issue 31,250 shares of Series D Preferred Stock to
acquire CARE. Series D Preferred Stock is convertible into shares of common
stock of the Registrant at a conversion rate of 1 Series D Preferred Share to
1,000 common stock shares, and can be redeemed by the Registrant at any time
within one year of its issuance.
Victoria Montreux, S.A. from whom the Registrant acquired CARE, is an
affiliate of the Registrant and the major shareholder of the Registrant's common
stock. All directors of the Registrant are also the directors of Victoria
Montreux, S.A.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a)(b) The required financial statements and pro forma financial
information is unavailable as of the date hereof and will be filed by the
Registrant pursuant to the requirements of the Securities Exchange Act and the
rules and regulations promulgated thereunder within 60 days of the date of the
event reported herein.
(c) EXHIBITS
1. Stock Purchase Agreement
<PAGE>
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 thereunto duly authorized.
Dated: June 3, 1996 CHINA INDUSTRIAL GROUP, INC.
By: /s/ Benthony Ip
---------------------------
Benthony Ip
Chief Financial Officer
<PAGE>
EXHIBIT 1
STOCK PURCHASE AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT
by and between
CHINA INDUSTRIAL GROUP, INC.,
a Colorado corporation
and
VICTORIA MONTREUX, S.A.,
a British Virgin Islands corporation
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated May 18, 1996, by and among
China Industrial Group, Inc. a Nevada corporation (hereinafter called
"Purchaser") and Victoria Montreux, S.A., a British Virgin Islands corporation
(hereinafter called "Company").
W I T N E S S E T H
WHEREAS, Company is the sole shareholder and beneficial owner of 100% of
common stock of Cashmere International Holdings Limited, A British Virgin
Islands corporation ("CARE"), consisting of 50,000 common stock shares, $1.00
par value per share; and
WHEREAS, CARE is a company engaged in the business of manufacturing and
selling of cashmere products with production facilities located in the People's
Republic of China; and
WHEREAS, Company desires to sell 100% of its common stock to Purchaser on
the terms and conditions set forth in this Stock Purchase Agreement (hereinafter
called "Agreement"); and
WHEREAS, Purchaser desires to buy all of the 50,000 shares of common stock
of Company (the "Shares") on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed between the parties hereto as follows:
ARTICLE 1.
SALE AND PURCHASE OF THE SHARES
1.1 SALE OF THE SHARES. At the date of the signing of this Agreement
as provided in Section 3.1 hereto (the "Closing"), subject to the terms and
conditions herein set forth, and on the basis of the representations, warranties
and agreements herein contained, Company shall sell to Purchaser, and Purchaser
shall purchase from Company, the Shares.
1.2 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, Company
shall deliver certificates representing 50,000 shares (100% of the issued and
outstanding shares) to and registered in Purchaser's name, in form and substance
satisfactory to Purchaser, as shall be effective to vest in Purchaser all right,
title and interest in and to all of the Shares.
1.3 CONSIDERATION AND PAYMENT FOR THE SHARES. In consideration for the
Shares Purchaser shall pay the aggregate consideration (the "Purchase Price") of
31,250 shares of
1
<PAGE>
Series D Preferred Stock of the Purchaser. Such shares shall be convertible
into shares of common stock of the Purchaser at a conversion rate of 1 share of
Series D Preferred Stock to 1,000 shares of common stock of the Purchaser. The
terms and provisions of Series D Preferred Stock are set forth in the Statement
of Designation of Series D Preferred Stock, and attached hereto as Exhibit A.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF COMPANY. To induce Purchaser to
enter into this Agreement and to consummate the transactions contemplated
hereby, Company, as the sole shareholder of CARE, represents and warrants, as of
the date hereof and as of the Closing, as follows:
2.1.1 THE SHARES. The Shares have been duly authorized and upon
payment of the Purchase Price, will be fully paid and non-assessable. The
Company shall transfer title, in and to the Shares, to the Purchaser free
and clear of all liens, security interests, pledges, encumbrances, charges,
demands and claims, of any kind and nature whatsoever, whether direct or
indirect or contingent.
2.1.2 CORPORATE EXISTENCE AND AUTHORITY. CARE is a corporation
duly organized, validly existing and in good standing under the laws of the
British Virgin Islands. It has all requisite corporate power, franchises,
licenses, permits and authority to own its properties and assets and to
carry on its business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction in each state, nation
or other jurisdiction wherein the character of the business transacted by
it makes such qualification necessary.
2.1.3 CAPITALIZATION OF COMPANY. The authorized equity securities
of CARE consists of 50,000 shares of equity securities, of which 50,000
shares are issued and outstanding. No other shares of capital stock of
CARE are issued and outstanding. All of the issued and outstanding shares
have been duly and validly issued in accordance and compliance with all
applicable laws, rules and regulations and are fully paid and
nonassessable. There are no options, warrants, rights, calls, commitments,
plans, contracts or other agreements of any character granted or issued by
CARE which provide for the purchase, issuance or transfer of any shares of
the capital stock of CARE, nor are there any outstanding securities granted
or issued by CARE that are convertible into any shares of the equity
securities of CARE, and none is authorized. It is not obligated or
committed to purchase, redeem or otherwise acquire any of its equity. All
presently exercisable voting rights in CARE are vested exclusively in its
outstanding shares of equity securities, each share of which is entitled to
one vote on every matter to come before 's shareholders, and other than as
may be contemplated by this Agreement, there are no voting trusts or other
voting arrangements with respect to any of CARE's equity securities.
2
<PAGE>
2.1.4 SUBSIDIARIES. "Subsidiary" or "Subsidiaries" means all
corporations, trusts, partnerships, associations, joint ventures or other
Persons, as defined below, of which CARE or any other Subsidiary of CARE
owns not less than twenty percent (20%) of the voting securities or other
equity or of which CARE or any other Subsidiary of CARE possesses, directly
or indirectly, the power to direct or cause the direction of the management
and policies, whether through ownership of voting shares, management
contracts or otherwise. "Person" means any individual, corporation,trust,
association, partnership, proprietorship, joint venture or other entity.
2.1.5 EXECUTION OF AGREEMENT. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated
hereby will not: (a) violate, conflict with, modify or cause any default
under or acceleration of (or give any party any right to declare any
default or acceleration upon notice or passage of time or both), in whole
or in part, any charter, article of incorporation, bylaw, mortgage, lien,
deed of trust, indenture, lease, agreement, instrument, order, injunction,
decree, judgment, law or any other restriction of any kind to which CARE or
Company is a party or by which it or any of its properties is bound; (b)
result in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement or
business of CARE or Company; (c) violate any law, rule or regulation of any
federal or state regulatory agency; or (d) permit any federal or state
regulatory agency to impose any restrictions or limitations of any nature
on CARE or Company or any of its respective actions.
2.1.6 ABSENCE OF CERTAIN LIABILITIES. Since the date of the
financial statements of the CARE dated as of December 31, 1995, and
provided to Purchaser (the "Financial Statements"), the CARE has incurred
no liabilities or obligations of any nature other than in the ordinary
course of business and consistent with past practice. CARE is not directly
or indirectly liable to (by discount, repurchase agreement or otherwise),
or obligated in any other way to provide funds in respect of, or to
guarantee or assume any debt or obligation of, any person in any amount,
except as arising in the normal course of business subsequent to the
Financial Statements date. All liabilities of CARE can be prepaid in full
without penalty at any time.
2.1.7 ABSENCE OF CHANGES. Except as expressly provided in this
Agreement since the Financial Statements date and through the Closing,
there has not been and there will not be:
2.1.0.2. Any change or aggregate of changes in the
condition (financial or otherwise), business, operations, liquidity,
property, assets, liabilities, obligations or prospects of and
Subsidiaries resulting in a reduction of five percent (5%) of the net
worth of CARE or three percent (3%) of the net income of CARE,
whichever is lesser at the time of change;
2.1.0.1 Any change in the capitalization of CARE,
including, without limitation, the issuance by CARE of any shares of
stock of any class, any
3
<PAGE>
subscriptions, options, warrants, convertible securities, rights,
calls, agreements, commitments or rights affecting or relating in any
manner whatsoever to any equitable interest in CARE;
2.1.0.2. Any direct or indirect purchase, redemption or
other acquisition by CARE, or any commitment, plan or agreement by
CARE to purchase, redeem or otherwise acquire any shares of its
capital stock or other equitable interest;
2.1.0.3. Any merger or consolidation or agreement to merge
or consolidate by CARE with another Person, or any purchase of or
investment in or agreement in the business of another Person;
2.1.0.4. Any declaration, payment or setting aside by CARE
of any dividends or other distributions of any assets of any kind
whatsoever to its shareholders or other equitable owners, except for
ordinary salary payments for services actually rendered;
2.1.0.5. Any release, cancellation, modification or waiver
of any obligation, indebtedness, liability, lien or encumbrance held
by CARE, unless such obligation, indebtedness, liability, lien or
encumbrance has been paid in full at the time of release;
2.1.0.6. Any waiver, compromise or settlement by CARE of
any right or claim in excess of ten thousand dollars ($10,000.00); or
any institution or settlement of or agreement to settle, any
litigation, action or proceeding before any court or governmental body
relating to the CARE or any of its properties;
2.1.0.7. Any mortgage, pledge or other subjection to any
lien, claim, charge, option or encumbrance of any property, asset,
right or business of CARE, other than liens for taxes not yet due and
payable and any continuing statutory landlord's lien;
2.1.0.8. Any incurrence of any indebtedness, obligations or
liabilities (whether absolute, accrued, contingent, known or unknown,
due or to become due) by CARE except those arising in the ordinary
course of business and consistent with past practice, but in no event
in excess of ten thousand dollars ($10,000.00) when all such
indebtedness, obligations and liabilities are aggregated;
2.1.0.9. Any assumptions, guarantees or endorsements by
CARE of the obligations of any Person, except in the ordinary course
of business and consistent with past practice, but in no event in
excess of ten thousand dollars ($10,000.00) when all such assumptions,
guarantees and endorsements are aggregated;
4
<PAGE>
2.1.0.10. Any payment or satisfaction by CARE of any
liability, obligation or indebtedness, other than those incurred since
the Financial Statements date in the ordinary course of business and
consistent with past practice;
2.1.0.11. Any loan or advance, any commitment to loan or
advance, or any renewal, refunding or extension of any existing loan,
made by CARE to any Person, except in the ordinary course of business
and consistent with past practice, but in no event any loan or
advance, any commitment to loan or advance, or any renewal, refunding
or extension of any existing loan, by CARE to any of its officers,
directors or holders or five percent (5%) or more of the capital stock
or equitable interest, or to any affiliate of any such officer,
director or holder, as the term "affiliate" is defined for purposes of
the Securities Act of 1933 and the rules and regulations thereunder;
2.1.0.12. Any creation, renewal, change or termination, or
any notice of any proposed renewal, change or termination of any
contract, agreement, commitment, obligation, lease or license
involving more than five thousand dollars ($5,000.00) or extending
beyond six (6) months from the date of this Agreement, to which CARE
is a party or by which CARE or its property is bound;
2.1.0.13. Any action or inaction which has caused or will
cause a breach or default in any contract, agreement, obligation,
lease or license to which the CARE is a party or by which the CARE or
its property is bound;
2.1.0.14. Any sale, assignment, lease, abandonment or other
disposition by the CARE of any real property, or any sale,
assignment, transfer, license, lease or other disposition by CARE of
any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention,
process, know-how, formula, trade secret or other intangible asset;
2.1.0.15. Any sale, assignment or transfer of contract,
agreement, lease, of an asset by CARE, except in the ordinary course
of business and consistent with past practice;
2.1.0.16. Any lapse in any insurance policy or coverage of
CARE;
2.1.0.17. Any damage, destruction or loss to the business
or properties of CARE; whether or not covered by insurance,
including, without limitation, any damage, destruction or loss as a
result of fire, explosion, accident, earthquake, lightening, frost,
aircraft, vehicle, smoke, hail, flood, drought, storm, strike, work
stoppage, lockout, sabotage, embargo, condemnation, riot, civil
disturbance, vandalism or act of God or public enemy;
5
<PAGE>
2.1.0.18. Any granting of powers of attorney by CARE; any
change in their banking or safe deposit arrangements; any writing up
or writing down of the carrying value of any of their assets; any
change in their depreciation or amortization policies or rates
heretofore adopted; or any change in any basic policy or practice by
CARE with respect to liquidity management and cash flow planning,
lending, budgeting, pricing, profit and tax planning, personnel
practices and accounting practices; and,
2.1.0.19. Any action taken transaction entered into by CARE
other than in the ordinary course of business.
2.1.8 TAXES. Except as set forth elsewhere in this Agreement or
its Schedule:
2.1.0.20. All taxes, assessments, fees, penalties, interest
and other governmental charges with respect to CARE which have become
due and payable by its respective Financial Statements date have been
paid in full or adequately reserved against by CARE, and all taxes,
assessments, fees, penalties, interest and other governmental charges
which have become due and payable subsequent to the Financial
Statements date have been paid in full or adequately reserved against
on its books of account and such books are sufficient for the payment
of all unpaid federal, state, local, foreign and other taxes, fees and
assessments (including without limitation, income, property, sales,
use, franchise, capital stock, excise, added value, employees' income
withholding, social security and unemployment taxes), and all interest
and penalties thereon with respect to the periods then ended and for
all periods thereto;
2.1.0.21. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against CARE, nor are there any
actions, suites, proceedings, investigations or claims now pending
against CARE, nor are there any actions, suits, proceedings,
investigations or claims now pending against CARE in respect of any
tax or assessment, or any matters under discussion with any federal,
state, local or foreign authority relating to any taxes or
assessments, or any claims for additional taxes or assessments
asserted by any such authority, and there is no basis for the
assertion of any additional taxes or assessments against CARE; and
2.1.0.22. The consummation of the transactions contemplated by
this Agreement will not result in the imposition of any additional
taxes on or assessments against CARE.
2.1.9 DISPUTES AND LITIGATION. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or accusation
pending, threatened against or affecting CARE or any of its properties,
assets or business or to which CARE is a party, in any court or before any
arbitrator of any kind or before or by any governmental agency (including,
without limitation, any federal, state, local,
6
<PAGE>
foreign or other governmental department, commission, board, bureau, agency
or instrumentality), and there is no basis for such suit, action,
litigation, proceeding, investigation, claim, complaint, or accusation; (b)
there is no pending or threatened change in any environmental, zoning or
building laws, regulations or ordinances which affect or could affect CARE
or any of its properties, assets or businesses; and (c) there is no
outstanding order, writ, injunction, decree, judgment or award by any
court, arbitrator or governmental body against or affecting CARE or any of
its properties, assets or business. There is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar
right on the part of any director or officer of CARE or the Company or any
such person's heirs, executors or administrators as against CARE.
2.1.10 COMPLIANCE WITH LAWS. CARE has at all times been, and
presently is, in full compliance with, and has not received notice of any
claimed violation of, any applicable federal, state, local, foreign and
other laws, rules and regulations. CARE has filed all returns, reports and
other documents and furnished all information required or requested by any
federal, state, local or foreign governmental agency and all such returns,
reports, documents and information are true and complete in all respects.
All permits, licenses, orders, franchises and approvals of all federal,
state, local or foreign governmental or regulatory bodies required of CARE
for the conduct of its business have been obtained, no violations are or
have been recorded in respect of any such permits, licenses, orders,
franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or
informal, pending or threatened, which may revoke, limit, or question the
validity, sufficiency or continuance of any such permit, license, order,
franchise or approval. Such permits, licenses, orders, franchises and
approvals are valid and sufficient for all activities presently carried on
by CARE.
2.1.11 GUARANTIES. CARE has not guaranteed any dividend,
obligation or indebtedness of any Person; nor has any Person guaranteed any
dividend, obligation or indebtedness of CARE.
2.1.12 BOOKS AND RECORDS. CARE keeps its books, records and
accounts (including, without limitation, those kept for financial reporting
purposes and for tax purposes) in accordance with good business practice
and in sufficient detail to reflect the transactions and dispositions of
its assets, liabilities and equities. The minute books of CARE contain
records of its shareholders' and directors' meetings and of action taken by
such shareholders and directors. The meeting of directors and shareholders
referred to in such minute books were duly called and held, and the
resolutions appearing in such minute books were duly adopted. The
signatures appearing on all documents contained in such minute books are
the true signatures of the persons purporting to have signed the same.
7
<PAGE>
2.2 TRANSFER OF ASSETS OF CARE. Simultaneously with the sale, the Company
shall transfer and assign to the Purchaser the tangible and intangible assets
which presently constitute CARE's business.
8
<PAGE>
ARTICLE 3.
CLOSING AND DELIVERY OF DOCUMENTS
3.1 CLOSING. The Closing shall be deemed to have occurred as of the date
of signing of this Agreement. Subsequent to the signing, the following shall
occur as a single integrated transaction:
3.2 DELIVERY BY COMPANY.
(a) Company shall deliver to the Purchaser the stock certificates and
all instruments of conveyance and transfer required by Section 1.2.
(b) Company shall deliver, or cause to be delivered, to the Purchaser
such instruments, documents and certificates as are required to be
delivered by Company or its representatives pursuant to the provisions of
this Agreement.
3.3 DELIVERY BY PURCHASER.
(a) The Purchaser shall deliver the Purchase Price and all
instruments of conveyance and transfer required by Section 1.3.
(b) The Purchaser shall deliver, or cause to be delivered, to Company
such instruments, documents and certificates as are required to be
delivered by the Purchaser or its representatives pursuant to the
provisions of this Agreement.
3.4 ELECTIONS. The Purchaser, as controlling stockholder, shall execute
such written consents as may be necessary to elect directors of CARE in
replacement of those directors who shall have been removed, or resigned,
from office pursuant to the terms of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 TERMINATION. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
4.1.1 By the mutual consent of all of the parties;
4.1.2 By the Purchaser at any time in the event of a breach or
default by Company in the observance or in the timely performance of any of
its obligations hereunder which is not waived by Purchaser and which
remains uncured for fifteen (15) days after receipt of notice in writing of
such breach or default;
9
<PAGE>
4.1.3 By at any time in the event of a breach or default by the
Purchaser in the observance or in the timely performance of any of its
obligations hereunder which is not waived by Company and which remains
uncured for fifteen (15) days after receipt of notice in writing of such
breach or default;
4.1.4 If the Closing shall not have occurred by May 30, 1996, at
anytime thereafter by the Purchaser if the Purchaser is not on said date in
default in the observance or in the due and timely performance of any of
its obligations hereunder; or
4.1.5 If the Closing shall not have occurred by May 30, 1996, at
anytime thereafter by Company if is not on said date in default in the
observance or in the due and timely performance of any of its obligations
hereunder.
No termination under this section shall be effective unless and until the
terminating party gives written notice of such termination to the other party.
4.2 WAIVER AND AMENDMENT. Any term, provision, covenant, representation,
warranty or condition of this Agreement may be waived, but only by a written
instrument signed by the party entitled to the benefits thereof. The failure or
delay of any party at any time or times to require performance of any provision
hereof or to exercise its rights with respect to any provision hereof shall in
no manner operate as a waiver of or affect such party's right at a later time to
enforce the same. No waiver by any party of any condition, or of the breach of
any term, provision, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or waiver of any
other condition or of the breach of any other term, provision, covenant,
representation or warranty. No modification or amendment of this Agreement
shall be valid and binding unless it be in writing and signed by all parties
hereto.
ARTICLE 5
COVENANTS
5.1 To induce the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, and without limiting any covenant,
agreement, representation or warranty made Company covenants and agrees as
follows:
5.1.1 NOTICES AND APPROVALS. Company agrees: (a) to give and to
cause its Subsidiaries to give all notices to third parties which may be
necessary or deemed desirable by Purchaser in connection with this
Agreement and the consummation of the transactions contemplated hereby; (b)
to use its best efforts to obtain and to cause its Subsidiaries to obtain,
all federal and state governmental regulatory agency approvals, consents,
permit, authorizations, and orders necessary or deemed desirable by
Purchaser in connection with this Agreement and the consummation of the
transaction contemplated hereby. At least ten (10) business days prior to
10
<PAGE>
the submission of any application with respect to any of the foregoing
approvals, consents, permits, authorizations and orders, Company or its
Subsidiary shall deliver a copy thereof to the Purchaser. In the event the
Purchaser shall request any modification in the form or content of any such
application, shall, and use its best efforts to cause its Subsidiaries to
make such change or modification and, submit the application as modified or
changed; and (c) to use its best efforts to obtain, and to cause its
Subsidiaries to obtain, all consents and authorizations of any other third
parties necessary or deemed desirable by the Purchaser in connection with
this Agreement and the consummation of the transactions contemplated
hereby.
5.1.2 INFORMATION FOR PURCHASER'S STATEMENTS AND APPLICATIONS.
Company and its Subsidiaries and their employees, accountants and
attorneys shall cooperate fully with Purchaser in the preparation of any
statements or applications made by the Purchaser to any federal or state
governmental regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish Purchaser with all
information concerning Company and Subsidiaries necessary or deemed
desirable by Purchaser for inclusion in such statements and applications,
including, without limitation, all requisite financial statements and
schedules. At the time any such statement or application is filed and at
such other times as Purchaser may request, the Company shall provide
Purchaser with a certificate executed by the respective Company's or
Subsidiary's executive officers confirming in such detail as Purchaser may
request the information concerning Company or Subsidiary which is contained
in such statement or application.
5.1.3 INDEMNIFICATION. Each and every provision in this Agreement
has been independently bargained for and relied upon by the Purchaser, and
Company agrees to indemnify and hold harmless the Purchaser against and in
respect of any and all liability, damage, deficiency, loss, cost or expense
(including attorney's fees and costs of investigation) arising from and
untrue representation, breach of warranty or non-fulfillment of any
covenant contained herein or in any document, certificate or instrument
delivered to Purchaser hereunder made by Company, even though any such
representation, warranty or covenant may have been made by Company in good
faith and to the best of its knowledge. In the event Purchaser has to take
legal action to enforce this indemnity Company, grants jurisdiction to the
courts of the State of California over them.
11
<PAGE>
ARTICLE 6
MISCELLANEOUS
6.1 EXPENSES. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
6.2 NOTICES. Any notice, request, instruction or other document required
by the terms of this Agreement, or deemed by any of the parties hereto to be
desirable, to be given to any other party hereto shall be in writing and shall
be given by prepaid telegram or delivered or mailed by registered or certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
TO PURCHASER:
China Industrial Group, Inc.
2101 Central Plaza, 18 Harbour Road, Hong Kong
Attn. Benthony Ip
TO COMPANY:
Victoria Montreux, S.A.
P.O.Box 116, Road Town, Tortola, British Virgin Islands
Attn. Benthony Ip
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section, said notice shall be conclusively deemed
given at the time of such delivery. If notice is given by mail in accordance
with the provisions of this Section, such notice shall be conclusively deemed
given forty-eight (48) hours after deposit thereof in the United States mail.
If notice is given by telegraph in accordance with the provisions of this
Section, such notice shall be conclusively deemed given at the time that the
telegraphic agency shall confirm delivery thereof to the addressee.
12
<PAGE>
6.3 ENTIRE AGREEMENT. This Agreement, together with the Schedule and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any party
hereto which is not embodied in this Agreement, or in the Schedule 1or exhibits
hereto or the written statements, certificates, or other documents delivered
pursuant hereto or in connection with the transactions contemplated hereby, and
no party hereto shall be bound by or liable for any alleged understanding,
promise, inducement, statement, representation, warranty, covenant or condition
not so set forth.
6.4 SURVIVAL OF REPRESENTATIONS. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall survive the
Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto, notwithstanding that such party knew or should have known at
the time of Closing that such right or remedy existed.
6.5 INCORPORATED BY REFERENCE. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
6.6 REMEDIES CUMULATIVE. No remedy herein conferred upon Purchaser is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
6.7 EXECUTION OF ADDITIONAL DOCUMENTS. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
6.8 FINDERS' AND RELATED FEES. Each of the parties hereto is responsible
for, and shall indemnify the other against, any claim by any third party to a
fee, commission, bonus or other remuneration arising by reason of any services
alleged to have been rendered to or at the instance of said party to this
Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
13
<PAGE>
6.9 GOVERNING LAW. This Agreement has been negotiated and executed in the
State of California and shall be construed and enforced in accordance with the
laws of such state.
6.10 FORUM. Each of the parties hereto agrees that any action or suit
which may be brought by any party hereto against any other party hereto in
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Orange County, California.
6.11 BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns.
6.12 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date first written hereinabove.
CHINA INDUSTRIAL GROUP, INC., a
Colorado corporation ("PURCHASER")
By: /s/ Benthony Ip
___________________________________
Its: Chief Financial Officer
__________________________________
VICTORIA MONTREUX, S.A.,
a British Virgin Islands corporation ("COMPANY")
By: /s/ Benthony Ip
____________________________________
Its: Authorized Officer
____________________________________
15
<PAGE>
EXHIBIT A
DESIGNATION STATEMENT PURSUANT TO SECTION 7-4-102(5)
OF COLORADO CORPORATION CODE
OF CHINA INDUSTRIAL GROUP, INC.
VICTORIA LAM and BENTHONY IP, certify that they are the President and
Secretary, respectively, of China Industrial Group, Inc., a Colorado corporation
(the "Corporation"); that, pursuant to the Corporation's Articles of
Incorporation and Sections 7-4-102(3) and 7-4-102(4) of the Colorado Corporation
Code, the Board of Directors of the Corporation duly adopted the following
resolutions on May__, 1996; and that none of the Series D Preferred Stock has
been issued.
1. The number of shares constituting the Series D Preferred Stock shall
be 31,250.
2. The holders of shares of Series D Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of any
funds at the time legally available therefor, dividends at the same
time and on a parity with holders of common stock, as if on the date
immediately prior to the record date for such dividend, the Series D
Preferred Stock had been converted into common stock at the Conversion
Rate. Each share of Series D Preferred Stock shall rank on a parity
with each other share of Series D Preferred Stock with respect to
dividends.
3. The Series D Preferred Stock may be redeemed by the Company at any
time within twelve months of its date of issuance (the "Redemption
Date") at a redemption price equal to the higher of the closing bid
price of the Company's common stock on May 18, 1996 or 90% of the
closing bid price of the Company's common stock on the day
immediately preceding the Redemption Date, plus any accrued but
unpaid dividends, including dividends accrued during the first
twelve months after issuance, if any.
4. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of shares of Series D
Preferred Stock shall be entitled to receive from the assets of the
Corporation such amount in cash or other property as received by
holders of common stock. Each share of Series D Preferred Stock shall
rank on a parity with each other share of Series D Preferred Stock and
each share of Series D Preferred Stock, with respect to the respective
preferential amounts fixed for such series payable upon any
distribution of assets by way of liquidation, dissolution, or winding
up of the Corporation.
5. Except as otherwise provided by law, the holders of Series D Preferred
Stock shall vote as a class with the holders of common stock and
Series D Preferred Stock, and holders of the Series D Preferred Stock
shall be entitled to one thousand votes per share (the "Voting
Rights") on any matter submitted to the holders of common and Series D
Preferred Stock.
16
<PAGE>
If the Corporation shall at any time subdivide the outstanding shares
of common stock without an equivalent subdivision of the Series D
Preferred Stock, the Voting Rights then in effect immediately before
that subdivision shall be proportionately increased, and, if the
Corporation shall at any time combine the outstanding shares of common
stock without an equivalent combination of the Series D Preferred
Stock, the Voting Rights then in effect immediately before that
combination shall be proportionately decreased. Any adjustment
under this subsection shall become effective at the close of business
on the date the subdivision or combination becomes effective. A
dividend on any security of the Corporation payable in common stock
of the Corporation shall be considered a subdivision of common stock
for purposes of this subsection (f) at the close of business on the
record date for the determination of holders of any security
entitled to receive such dividend.
6. The holders of shares of Series D Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(1) Each share of Series D Preferred Stock shall be convertible
into Common Stock at the initial conversion
rate ("Conversion Rate") of one thousand fully paid and
nonassessable shares of Common Stock for each share of
Series D Preferred Stock upon submission of the notice of
conversion by the holder thereof to the Company. In
effecting the conversion, the Corporation shall pay any
cumulative dividends accrued and unpaid on the shares being
converted in cash.
(2) No fractional shares of Common Stock shall be issued upon
conversion of the Series D Preferred Stock and any shares of
Series D Preferred Stock surrendered for conversion which
would otherwise result in a fractional
17
<PAGE>
share of Common Stock shall be redeemed for the then fair
market value thereof as determined by the Corporation's
Board of Directors, payable as promptly as possible whenever
funds are legally available therefor.
(b) ADJUSTMENTS TO CONVERSION RATE.
(1) STOCK SPLITS AND COMBINATIONS. If the Corporation shall at
any time subdivide the outstanding shares of Common Stock
without an equivalent subdivision of the Series D Preferred
Stock, the Conversion Rate then in effect immediately before
that subdivision shall be proportionately increased, and, if
the Corporation shall at any time combine the outstanding
shares of Common Stock without an equivalent combination of
the Series D Preferred Stock, the Conversion Rate then in
effect immediately before that combination shall be
proportionately decreased. Any adjustment under this
Section (b)(1) shall become effective at the close of
business on the date the subdivision or combination becomes
effective. A dividend on any security of the Corporation
payable in Common Stock of the Corporation shall be
considered a subdivision of Common Stock for purposes of
this Section (b)(1) at the close of business on the record
date for the determination of holders of any security
entitled to receive such dividend.
(2) RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common
Stock issuable on conversion of the Series D Preferred Stock
shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares provided
for above), the holders of the Series D Preferred Stock
shall, upon its conversion, be entitled to receive, in lieu
of the Common Stock which the holders would have become
entitled to receive but for such change, a number of shares
of such other class or classes of stock that would have been
subject to receipt by the holders if they had exercised
their rights of conversion of the Series D Preferred Stock
immediately before that change.
(3) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS.
If at any time there shall be a capital reorganization of
the Corporation's Common Stock (other
18
<PAGE>
than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section
(b) or merger of the Corporation into another corporation,
or the sale of the Corporation's properties and assets as,
or substantially as, an entirety to any other person), then,
as a part of such reorganization, merger or sale, lawful
provision shall be made so that the holders of the Series D
Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series D Preferred Stock, the number of
shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from
such merger, to which holders of the Common Stock
deliverable upon conversion of the Series D Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series A Preferred Stock had been
converted immediately before that capital reorganization,
merger or sale to the end that the provisions of this
paragraph (b)(3) (including adjustment of the Conversion
Rate then in effect and number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be
applicable after that event as nearly equivalently as may be
practicable.
(c) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provision of this Section 6
and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of the Series D Preferred Stock against impairment.
(d) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares
of Series D Preferred Stock, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of
Series D Preferred Stock effected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any
holder of Series D Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Conversion Rate at
the
19
<PAGE>
time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would
be received upon the conversion of such holder's shares of Series
D Preferred Stock.
(e) NOTICES OF RECORD DATE. In the event of the establishment by the
Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or
other distribution, the Corporation shall mail to each holder of
Series D Preferred Stock at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution and the amount and character of such dividend or
distribution.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the shares of the Series D
Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all then outstanding shares of the Series D Preferred Stock; and
if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of
all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(g) NOTICES. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Preferred
Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation.
8. Without the consent of holders of no less than a majority of Series D
Preferred Stock outstanding, the Corporation shall not issue any
additional shares of Preferred Stock with voting, liquidation,
preference, redemption or conversion rights equal or senior to those
of the Series D Preferred Stock.
Date:
------------------------ ------------------------------
Victoria Lam
Date:
------------------------ ------------------------------
Benthony Ip
20
