SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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<PAGE>
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------
(4) Date Filed:
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-2-
<PAGE>
[U.S.-CHINA INDUSTRIAL EXCHANGE, INC.]
[LETTERHEAD]
October 15, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of U.S.-China Industrial Exchange, Inc., a New York corporation (the "Company"),
to be held at the offices of the Company, 7201 Wisconsin Avenue, Bethesda,
Maryland, on October 28, 1996 at 10:30 A.M., New York City time (the "Special
Meeting").
As described in the Notice of Special Meeting and Proxy Statement
which accompany this letter, on September 27, 1996, the Company filed with the
Securities and Exchange Commission a registration statement for an underwritten
public offering (the "Public Offering") of equity units (the "Units"),
consisting of a certain number of the same units issued in the Company's initial
public offering in August 1994 (the "IPO Units"), each IPO Unit consisting of
one share of Common Stock, par value $.01 per share (the "Common Stock"), one
Redeemable Class A Warrant and one Redeemable Class B Warrant (collectively, the
"Warrants"), and for a unit purchase option granted to the underwriter. The
proposed Public Offering, if consummated, would raise gross proceeds of
approximately $10 million. The net proceeds (approximately $8.5 million) would
be used for working capital purposes, including the funding of the future
expansion of the Company's marketing and sales operations in China, Hong Kong
and elsewhere in Asia and the funding of certain aspects of the Company's
proposed health care services operations.
It is possible that the number of currently authorized but unissued
and unreserved shares of Common Stock will be less than the number of shares of
Common Stock which may need to be reserved for issuance upon exercise of the
Warrants included in or issuable pursuant to the Units offered in the Public
Offering and the related unit purchase option granted to the underwriter. The
number of IPO Units included in each Unit sold in the Public Offering will be
determined prior to the consummation thereof from within a predetermined range
based upon market prices and other factors. Assuming that the number of IPO
Units included in a Unit is at the highest end of this range as currently
contemplated and that the underwriter exercises its overallotment option in
full, 2,415,000 shares of Common Stock would be issued in the Public Offering,
7,245,000 shares of Common Stock
<PAGE>
would need to be reserved for issuance upon exercise of the Warrants issued in
the Public Offering and 840,000 shares of Common Stock would need to be reserved
for issuance upon exercise of the unit purchase option. Since there currently
are 1,840,000 shares of Common Stock outstanding and 2,000,000 shares of Class B
Common Stock, par value $.01 per share, outstanding, the additional shares of
Common Stock issued in connection with the Public Offering will reduce the
equity interests of existing shareholders and the voting interests of
non-affiliated shareholders. Nonetheless, receipt of the proceeds from the
proposed Public Offering (the consummation of which cannot, however, be assured)
is important for the Company's operations and future expansion.
The increase in the authorized number of shares of Common Stock would
also leave the Company with a substantial number of shares of Common Stock
available for additional financings and other corporate purposes.
Whether or not you can attend the meeting, please sign and return the
enclosed proxy. We would like your stock to be represented at the Special
Meeting.
Sincerely,
ROBERTA LIPSON
IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD AS
SOON AS POSSIBLE.
<PAGE>
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
7201 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
----------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1996
To the Shareholders of U.S.-China Industrial Exchange, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
U.S.- China Industrial Exchange, Inc., a New York corporation (the "Company"),
will be held at the offices of the Company, 7201 Wisconsin Avenue, Bethesda,
Maryland, on Monday, October 28, 1996 at 10:30 A.M., New York City time (the
"Special Meeting"), for the purpose of amending the Company's Restated
Certificate of Incorporation, as previously amended, to increase the number of
authorized shares of Common Stock, $.01 par value per share, from 18,000,000 to
28,000,000, and to transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Information regarding the matters to be acted upon at the Special
Meeting is contained in the accompanying Proxy Statement.
The close of business on October 9, 1996 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Special Meeting or any adjournment or postponement thereof.
We hope that you plan to attend the Special Meeting. However, if you
are not able to join us, we urge you to exercise your right as a shareholder and
vote. Please promptly sign, date and return the enclosed proxy card in the
accompanying postage prepaid envelope. You may, of course, attend the Special
Meeting and vote in person even if you have previously mailed your proxy card.
By Order of the Board of Directors,
ELYSE BETH SILVERBERG
Secretary
Bethesda, Maryland
October 15, 1996
================================================================================
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING. EACH
SHAREHOLDER IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WHICH IS
BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE ADDRESSED TO
THE COMPANY'S TRANSFER AGENT IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES.
================================================================================
<PAGE>
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
7201 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
--------------------
PROXY STATEMENT
--------------------
This Proxy Statement is furnished to the holders (the "Shareholders")
of Common Stock, par value $.01 per share (the "Common Stock"), and Class B
Common Stock, par value $.01 per share (the "Class B Common Stock," and,
together with the Common Stock, the "Shares"), of U.S.-China Industrial
Exchange, Inc., a New York corporation (the "Company") in connection with the
solicitation by and on behalf of its Board of Directors of proxies (a "Proxy" or
"Proxies") for use at a Special Meeting of Shareholders to be held at the
offices of the Company, 7201 Wisconsin Avenue, Bethesda, Maryland, on Monday,
October 28, 1996, at 10:30 A.M., New York City time (the "Special Meeting") and
at any adjournment or postponement thereof, for the purpose of amending the
Company's Restated Certificate of Incorporation, as previously amended, to
increase the number of authorized shares of Common Stock from 18,000,000 to
28,000,000 (the "Proposed Amendment"). The cost of preparing, assembling and
mailing the Notice of Special Meeting of Shareholders, this Proxy Statement and
Proxies is to be borne by the Company. The Company will also reimburse brokers
who are holders of record of Shares for their expenses in forwarding Proxies and
Proxy soliciting material to the beneficial owners of such Shares. In addition
to the use of the mails, Proxies may be solicited without extra compensation by
directors, officers and employees of the Company by telephone, telecopy,
telegraph or personal interview. The approximate mailing date of this Proxy
Statement is October 10, 1996.
If the enclosed Proxy is properly executed and returned, the Shares
represented thereby will be voted and if a choice is specified in the Proxy, the
Shares represented thereby will be voted in accordance with the specifications
so made. Any Proxy on which no direction is specified will be voted in favor of
the Proposed Amendment.
A Proxy may be revoked by a Shareholder at any time before its
exercise by filing with Elyse Beth Silverberg, the Secretary of the Company, at
the address set forth above, an instrument of revocation or a duly executed
Proxy bearing a later date, or by attendance at the Special Meeting and electing
to vote in person. Attendance at the Special Meeting will not, in and of itself,
constitute revocation of a Proxy.
The close of business on October 9, 1996 has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
Shareholders entitled to notice of, and to vote at, the Special Meeting and any
adjournment or postponement thereof.
VOTING
As of the Record Date, there were 1,840,000 shares of Common Stock
and 2,000,000 shares of Class B Common Stock outstanding. The shares of Class B
Common Stock are
<PAGE>
convertible at any time into shares of Common Stock on a one-for-one basis. Each
holder of Common Stock is entitled to one vote for each share held by such
holder and each holder of Class B Common Stock is entitled to six votes for each
share held by such holder. Shares of Common Stock and Class B Common Stock vote
as one class.
A majority of the Shares entitled to vote, represented in person or
by proxy, is required to constitute a quorum for the transaction of business.
Proxies submitted which contain abstentions or broker nonvotes will be deemed
present at the Special Meeting for determining the presence of a quorum. The
affirmative vote of the majority of the outstanding voting power of the Shares
is necessary to approve the Proposed Amendment. The holders of Class B Common
Stock, each of whom is a member of management and/or the Board of Directors of
the Company (or a trust on behalf of family members of such persons), possess
approximately 86.8% of the total voting power (including their presently
outstanding shares of Common Stock) of the Shares and, as such, will be able to
control the vote on the Proposed Amendment. These Shareholders have advised the
Company that they intend to vote in favor of the Proposed Amendment and,
accordingly, passage of the Proposed Amendment is assured. The Shareholders vote
at the Special Meeting by casting ballots (in person or by proxy) which are
tabulated by a person appointed by the Board of Directors before the Special
Meeting to serve as the inspector of election at the Special Meeting and who has
executed and verified an oath of office. Abstentions and broker nonvotes are
included in the determination of the number of Shares present at the meeting for
quorum purposes but are not counted in the tabulation of the votes cast on the
Proposed Amendment. Thus, an abstention from voting has the same legal effect as
a vote "against" the matter, even though the Shareholder may interpret such
action differently.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the ownership of
shares of the Company's Common Stock and Class B Common Stock, as of September
24, 1996 with respect to (i) holders known to the Company to beneficially own
more than five percent of the outstanding Common Stock or the Class B Common
Stock, (ii) each director, (iii) each executive officer of the Company whose
cash compensation exceeded $100,000 for the fiscal year ended December 31, 1995
and (iv) all directors and executive officers of the Company as a group.
-2-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Ownership (2)(3): Percent Of:
----------------------------------- --------------------------------
Name and Address of Common Class B Common Class B
Beneficial Shareholder (1) Stock Common Stock (4)(5) Stock Common Stock
- -------------------------- ----- ------------------- ----- ------------
<S> <C> <C> <C> <C>
Roberta Lipson 486,000(6) 1,040,000(7) 20.9% 52.0%
Elyse Beth Silverberg 324,000(8) 680,000 15.0% 34.0%
Lawrence Pemble 98,000(9) 200,000 5.1% 10.0%
Robert C. Goodwin, Jr. 18,000(10) 0 * *
Morris Lipson 60,000(11) 80,000(12) 3.2% 4.0%
3899 Live Oak Blvd.
Del Ray Beach, Florida
A. Kenneth Nilsson 1,000 0 * *
P.O. Box 2510
Monterey, California
Julius Y. Oestreicher 74,000(13) 0 3.9% *
235 Mamaroneck Avenue
White Plains, New York
All Executive Officers and 1,061,000(14) 2,000,000 36.8% 100%
Directors as a Group (7
persons)
</TABLE>
- -------------------------
* Less than 1%
(1) Unless otherwise indicated, the business address of each person named in
the table is c/o U.S.-China Industrial Exchange, Inc., 7201 Wisconsin
Avenue, Bethesda, Maryland 20814.
(2) Except as otherwise indicated, each of the parties listed has sole voting
and investment power with respect to all shares indicated below.
(3) Beneficial ownership is calculated in accordance with Rule 13d-3(d) under
the Securities Exchange Act of 1934, as amended.
(4) Mmes. Lipson and Silverberg and Mr. Pemble have placed 240,000, 153,000
and 51,000 shares, respectively, of Class B Common Stock in escrow and may
vote, but not dispose of, any of such shares during the term of the escrow
agreement. See "Escrow Shares" below.
(5) The Class B Common Stock is entitled to six votes per share, whereas the
Common Stock is entitled to one vote per share.
-3-
<PAGE>
(6) Consists of shares that may be purchased pursuant to outstanding Class A
Warrants and Class B Warrants.
(7) Includes 40,000 shares held by the Ariel Benjamin Lee Trust, of which Ms.
Lipson is a Trustee.
(8) Consists of shares that may be purchased pursuant to outstanding Class A
Warrants and Class B Warrants.
(9) Includes 96,000 shares that may be purchased pursuant to outstanding Class
A Warrants and Class B Warrants.
(10) Includes 3,000 shares that may be purchased pursuant to outstanding Class
A Warrants and Class B Warrants and 14,000 shares that may be purchased
pursuant to currently exercisable stock options.
(11) Includes 45,000 shares that may be purchased pursuant to outstanding Class
A Warrants and Class B Warrants.
(12) Consists of 40,000 shares held by the Daniel Lipson Plafker Trust and
40,000 shares held by the Jonathan Lipson Plafker Trust, both of which Mr.
Lipson is a Trustee.
(13) Does not include 40,000 shares of Common Stock beneficially owned by Mr.
Oestreicher's wife, which includes 30,000 shares that may be purchased
pursuant to outstanding Class A Warrants and Class B Warrants, as to which
Mr. Oestreicher disclaims beneficial ownership. Includes 64,000 shares
issuable upon the exercise of 16,000 unit purchase options sold to Mr.
Oestreicher for nominal cost on August 25, 1994 for services rendered in
connection with the Company's initial public offering. Each unit
underlying each such unit purchase option consists of one share of Common
Stock, one Class A Warrant and one Class B Warrant. Also includes 10,000
shares that may be purchased pursuant to currently exercisable stock
options.
(14) Includes an aggregate of 1,044,000 shares of Common Stock that may be
purchased pursuant to outstanding unit purchase options, Class A Warrants,
Class B Warrants and currently exercisable stock options.
ESCROW SHARES
Of the 2,000,000 shares of Class B Common Stock outstanding on the
date hereof, 450,000 shares (the "Escrow Shares") are held in escrow and will
not be assignable or transferable (but may be voted) until such time, if ever,
as the Escrow Shares are released from escrow in accordance with terms of the
escrow agreement. Each current holder of Class B Common Stock of the Company
contributed pro rata to the number of Escrow Shares in accordance with their
percentage ownership of Class B Common Stock. All Escrow Shares remaining in
escrow on March 31, 1999 will be forfeited and then canceled and contributed to
the Company's capital. The
-4-
<PAGE>
arrangement relating to the Escrow Shares was required by the underwriter as a
condition to the Company's initial public offering.
A shareholder's rights to his or her shares in escrow are not
affected by any change in his or her status as an employee, officer or director
of, or his or her relationship with, the Company, and, in the event of such
shareholder's death, the terms of the escrow agreement will be binding on such
shareholder's executor, administrator, estate and legatees.
All Escrow Shares will be released from escrow if and only if either:
(a) the Minimum Pretax Income (as defined below) is at least $3,000,000 for the
fiscal year ending December 31, 1996, or (b) the Minimum Pretax Income is at
least $3,750,000 for the fiscal year ending December 31, 1997, or (c) the
Minimum Pretax Income is at least $5,000,000 for the fiscal year ending December
31, 1998, or (d) the closing Bid Price of the Common Stock averages in excess of
$17.50 per share (subject to adjustment in the event of any stock split,
dividend or distribution, reverse stock split or other similar event) for 20
consecutive trading days at any time prior to August 18, 1997.
"Minimum Pretax Income" means for any fiscal year the Company's
income before provision for income taxes and exclusive of any extraordinary
earnings but inclusive of charges to income, if any, resulting from the release
of any Escrow Shares, all as reflected on the Company's audited financial
statements. For purposes of calculating Minimum Pretax Income, if additional
shares of Common Stock are issued, then the foregoing Minimum Pretax Income
levels for any year would increase proportionately; provided that no adjustments
to such Minimum Pretax Income levels shall be made upon the future issuance of
shares of Common Stock.
-5-
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
DESCRIPTION OF THE PROPOSED AMENDMENT
The Board of Directors has determined that it is advisable to amend
the Company's Restated Certificate of Incorporation, as previously amended, at
this time and has recommended that Shareholders approve the Proposed Amendment
to ARTICLE FOURTH of the Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 18,000,000 to 28,000,000 in
order to facilitate the proposed public offering of equity units described below
(the "Public Offering") while leaving the Company with a sufficient number of
shares of Common Stock available for other corporate purposes. The full text of
the Proposed Amendment is attached to this Proxy Statement as Exhibit A. The
Board has adopted a resolution authorizing the Proposed Amendment and has
directed that the Proposed Amendment be submitted to the shareholders for their
consideration.
PROPOSED PUBLIC OFFERING
The Company currently proposes to offer 10,000 units (11,500 units if
the underwriter's overallotment option is exercised) (the "Units") each
consisting of a minimum of 140 and a maximum of 210 IPO units (the "IPO Units").
Each IPO Unit is identical to the units sold in the Company's initial public
offering, which was completed in August 1994 (the "IPO"), and consists of one
share of Common Stock, one redeemable Class A Warrant ("Class A Warrant") and
one redeemable Class B Warrant ("Class B Warrant"). The components of the Units
and IPO Units will be transferable separately immediately upon issuance. The
actual number of IPO Units to be included in each Unit will be determined by
negotiations between the Company and the underwriter, based primarily on the
market price of the outstanding IPO Units and a determination of the number of
IPO Units needed to successfully market the Units in light of market
conditions, and, consequently, may exceed the maximum number of IPO Units set
forth above. Each Class A Warrant entitles the registered holder thereof to
purchase one share of Common Stock and one Class B Warrant at an exercise price
of $6.50, subject to adjustment, at any time until August 18, 1999. Each Class B
Warrant entitles the registered holder thereof to purchase one share of Common
Stock at an exercise price of $8.75, subject to adjustment, at any time until
August 18, 1999. The Class A Warrants and the Class B Warrants (collectively,
the "Warrants") are subject to redemption by the Company at a redemption price
of $.05 per Warrant on 30 days' prior written notice, provided the average of
the closing bid prices of the Common Stock exceeds $9.10 with respect to the
Class A Warrants or $12.25 with respect to the Class B Warrants (subject to
adjustment in each case) for 20 consecutive business days ending within 15 days
of the date on which notice of redemption is given.
The Common Stock and the Company's Class B Common Stock are
essentially identical, except that the Class B Common Stock has six votes per
share and the Common Stock has one vote per share and each share of Class B
Common Stock is convertible into one share of Common Stock. Upon completion of
the Public Offering, the holders of the Class B Common Stock will control
approximately 73.9% of the total voting power and will therefore be able to
elect all of
-6-
<PAGE>
the Company's directors and to control the Company. Certain shareholders of the
Company who are executive officers and directors of the Company and certain
members of their immediate families hold all of the outstanding shares of Class
B Common Stock. The Class B Common Stock is automatically converted into Common
Stock upon any sale or transfer, except to certain permitted transferees. The
holders of the Class B Common Stock could significantly reduce their ownership
of such stock while retaining control of the Company.
The following table sets forth the relative aggregate actual Share
ownership interests and voting interests of (i) the Company's executive
officers, directors and beneficial holders of 5% or more of any class of the
Company's voting securities ("Affiliated Shareholders"), (ii) all other current
Shareholders ("Other Current Shareholders") and (iii) purchasers of Units in the
proposed Public Offering ("New Shareholders"), before and after consummation of
the proposed Public Offering. The information reflecting consummation of the
Public Offering assumes, hypothetically, that each Unit will contain 210 shares
of Common Stock, that the underwriter will exercise its overallotment option in
full and that no Affiliated Shareholders or Other Current Shareholders will
purchase any Units (although they may do so) (a "Maximum Offering"). The table
reflects actual Share ownership only and does not otherwise reflect beneficial
ownership as calculated in accordance with Rule 13d-3(d) under the Securities
Exchange Act of 1934, as amended. As such, Shares which could be acquired upon
exercise of Warrants or options are not reflected as Shares owned for purposes
of the table.
PART 1 OF 2
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNED PERCENT OF CLASS
-------------------------- -------------------------
CLASS OF BEFORE THE AFTER THE BEFORE THE AFTER THE
COMMON PROPOSED PROPOSED PROPOSED PROPOSED
CLASS OF OWNER STOCK OFFERING OFFERING OFFERING OFFERING
- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Affiliated Common Stock 19,000 19,000 1.0% 0.5%
Shareholders Class B
Common Stock 2,000,000 2,000,000 100.0% 100.0%
--------- ---------
2,019,000 2,019,000
Other Current Common Stock 1,821,000 1,821,000 99.0% 42.8%
Shareholders Class B
Common Stock -- -- -- --
--------- ---------
1,821,000 1,821,000
New Common Stock -- 2,415,000 -- 56.8%
Shareholders Class B
Common Stock -- -- -- --
--------- ---------
-- 2,415,000
PART 2 OF 2
PERCENTAGE OF TOTAL
COMMON STOCK AND PERCENTAGE OF TOTAL
CLASS B COMMON STOCK VOTING POWER
-------------------------- -------------------------
CLASS OF BEFORE THE AFTER THE BEFORE THE AFTER THE
COMMON PROPOSED PROPOSED PROPOSED PROPOSED
CLASS OF OWNER STOCK OFFERING OFFERING OFFERING OFFERING
- -------------- -------- -------- -------- -------- --------
Affiliated Common Stock
Shareholders Class B
Common Stock 52.6% 32.3% 86.8% 73.9%
Other Current Common Stock
Shareholders Class B
Common Stock 47.4% 29.1% 13.2% 11.2%
New Common Stock
Shareholders Class B
Common Stock -- 38.6% -- 14.9%
</TABLE>
The following table includes the information set forth in the
preceding table based on similar assumptions but, in addition, assumes exercise
of all Class A Warrants and Class B Warrants outstanding or issuable upon the
exercise of outstanding Warrants or options before and after consummation of the
proposed Maximum Offering. There currently are outstanding 2,140,000 Class A
Warrants (318,000 of which are owned by Affiliated Shareholders), 2,140,000
Class B
-7-
<PAGE>
Warrants (318,000 of which are owned by Affiliated Shareholders), 160,000 unit
purchase options (144,000 of which were issued to the underwriter of the
Company's initial public offering and 16,000 of which were issued to an
Affiliated Shareholder in connection with the Company's initial public offering)
and 168,060 stock options issued under the Company's 1994 Stock Option Plan
(30,667 of which are held by Affiliated Shareholders). In addition, in
connection with the proposed Public Offering, the underwriter will be granted a
unit purchase option to purchase up to 1,000 Units.
PART 1 OF 2
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNED PERCENT OF CLASS
-------------------------- -------------------------
CLASS OF BEFORE THE AFTER THE BEFORE THE AFTER THE
COMMON PROPOSED PROPOSED PROPOSED PROPOSED
CLASS OF OWNER STOCK OFFERING OFFERING OFFERING OFFERING
- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Affiliated Common Stock 1,061,000 1,061,000 11.8% 5.4%
Shareholders Class B
Common Stock 2,000,000 2,000,000 100.0% 100.0%
--------- ---------
3,061,000 3,061,000
Other Current Common Stock 7,939,893 7,939,893 88.2% 40.7%
Shareholders Class B
Common Stock -- -- -- --
--------- ---------
7,939,893 7,939,893
New Common Stock -- 10,500,000 -- 53.8%
Shareholders Class B
Common Stock -- -- -- --
--------- ---------
-- 10,500,000
PART 2 OF 2
PERCENTAGE OF TOTAL
COMMON STOCK AND PERCENTAGE OF TOTAL
CLASS B COMMON STOCK VOTING POWER
-------------------------- -------------------------
CLASS OF BEFORE THE AFTER THE BEFORE THE AFTER THE
COMMON PROPOSED PROPOSED PROPOSED PROPOSED
CLASS OF OWNER STOCK OFFERING OFFERING OFFERING OFFERING
- -------------- -------- -------- -------- -------- --------
Affiliated Common Stock
Shareholders Class B
Common Stock 27.8% 14.2% 62.2% 41.5%
Other Current Common Stock
Shareholders Class B
Common Stock 72.2% 36.9% 37.8% 25.2%
New Common Stock
Shareholders Class B
Common Stock -- 48.8% -- 33.3%
</TABLE>
REASONS FOR THE PROPOSED AMENDMENT
Of the 18,000,000 currently authorized shares of Common Stock,
11,128,000 currently are either outstanding or reserved for issuance as follows:
<TABLE>
<S> <C>
Outstanding 1,840,000
------------
Reserved for issuance:
-Conversion of Class B Common Stock to Class A Common Stock 2,000,000
-Exercise of outstanding Class A Warrants and outstanding and
issuable Class B Warrants 6,420,000
-Exercise of Underwriter's and consultant's unit purchase options
from initial public offering ("IPO") 640,000
-Exercise of stock options granted or to be granted under the Company's
1994 Stock Option Plan 228,000
------------
total reserved for issuance 9,288,000
------------
total outstanding and reserved for issuance 11,128,000
------------
</TABLE>
If the Maximum Offering is consummated, approximately 21,628,000
shares of Common Stock would be issued and reserved for issuance, as follows:
-8-
<PAGE>
<TABLE>
<S> <C>
Outstanding 4,255,000
------------
Reserved for issuance:
-Conversion of Class B Common Stock to Class A Common Stock 2,000,000
-Exercise of outstanding Class A Warrants and outstanding and
issuable Class B Warrants 13,665,000
-Exercise of Underwriter's and consultant's unit purchase options
from the IPO 640,000
-Exercise of Underwriter's Unit Purchase Option from Public Offering 840,000
-Exercise of stock options granted or to be granted under the Company's
1994 Stock Option Plan 228,000
----------
total reserved for issuance 17,373,000
----------
total outstanding and reserved for issuance 21,628,000
----------
</TABLE>
The Company may not have enough authorized shares of Common Stock to
complete the Public Offering (including all the shares of Common Stock which
must be available for issuance upon exercise of Warrants and the unit purchase
option). For this reason, and in order to leave the Company with a sufficient
number of available shares for other proper corporate purposes which may be
identified by the Board of Directors in the future, such as the sale of stock to
obtain additional financing, the acquisition or merger into the Company of other
companies and the funding of future equity compensation or employee stock plans
to retain and attract qualified executives and employees, the Board of Directors
believes that it is necessary to adopt the Proposed Amendment. Other than in
connection with the proposed Public Offering, the Company does not, however,
have any specific purposes or plans at this time for use of the additional
shares of Common Stock to be authorized by the Proposed Amendment. The issuance
of additional shares of Common Stock for the above-mentioned purposes may have a
dilutive effect on earnings per share (if any) and on a Shareholder's percentage
voting power. The Company also has authorized 5,000,000 shares of Preferred
Stock, par value $.01 per share, of which none have been issued.
There can be no assurance that the proposed Public Offering will be
consummated even if the Proposed Amendment is adopted or that the terms of the
Public Offering will not change substantially from those described above.
CERTAIN CONSEQUENCES OF THE PROPOSED AMENDMENT
The Proposed Amendment would not change any of the terms of the
Company's Common Stock or Class B Common Stock (which are identical, except that
the Common Stock has one vote per share and Class B Common Stock has six votes
per share), but would merely increase the number of shares of Common Stock which
the Company is authorized to issue.
The shares of Common Stock to be authorized by the Proposed Amendment
will be available for issuance at such times and for such corporate purposes as
the Board of Directors may deem advisable without further action by the
Company's Shareholders, except as may be required by applicable laws. Other than
in connection with the proposed Public Offering, management has no arrangements,
agreements, understandings or plans at the present time for the issuance or use
of the additional shares of Common Stock proposed to be authorized. Upon
issuance, such shares of Common Stock will have the same rights as the
outstanding shares of Common Stock. Holders of Common Stock do not have
preemptive rights. Any future issuance of Common Stock will be subject to the
rights of holders of outstanding shares of any preferred stock which the Company
may issue in the future.
-9-
<PAGE>
Although an increase in the authorized number of shares of Common
Stock could, under certain circumstances, have an anti-takeover effect (by, for
example, permitting issuances which would dilute the stock ownership of a person
seeking to effect a change in the composition of the Board of Directors or
contemplating a tender offer or other transaction for the combination of the
Company with another company), the Proposed Amendment is not being proposed in
response to any effort of which the Company is aware to accumulate the Company's
shares of Common Stock or obtain control of the Company, nor is it part of a
plan by management to recommend a series of similar amendments to the Board of
Directors and Shareholders. The Board does not currently contemplate
recommending the adoption of any other amendments to the Company's Restated
Certificate of Incorporation that could be construed to affect the ability of
third parties to take over or change control of the Company.
Any issuances of Common Stock at less than the then market value
generally will require adjustments (i.e., decreases) of the exercise prices
under the Class A Warrants, Class B Warrants, the unit purchase option to be
issued to the underwriter in the proposed Public Offering and the unit purchase
options issued in connection with the IPO, as well as increases in the number of
shares of Common Stock which would be issued pursuant thereto.
APPRAISAL RIGHTS
There are no rights of appraisal or similar rights of dissenters with
respect to the Proposed Amendment.
EFFECTIVE DATE
If approved by the Shareholders, the Proposed Amendment will become
effective upon the filing of a Certificate of Amendment with the Secretary of
State of New York amending the Company's Restated Certificate of Incorporation,
which filing will be made as soon as reasonably practicable after Shareholder
approval.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY RECOMMENDED A VOTE FOR THE
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth
herein that may come before the Special Meeting. If, however, further business
properly comes before the Special Meeting, the persons named in the proxies will
vote the Shares represented thereby in accordance with their judgment.
-10-
<PAGE>
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
shareholder action at annual meetings in accordance with regulations adopted by
the Securities and Exchange Commission. To be considered for inclusion in the
proxy statement and form of proxy relating to the 1997 annual meeting, such
proposals must be received by the Company not later than January 4, 1997.
Proposals should be directed to the attention of the Secretary of the Company.
ANNUAL REPORT AND FORM 10-KSB
The Company has previously furnished to each shareholder of record on
April 25, 1996 the Company's 1995 Annual Report. The Company will furnish
without charge to each person whose proxy is being solicited, upon and in
accordance with the written request of such person, another copy of the
Company's 1995 Annual Report and/or a copy of the Company's annual report on
Form 10-KSB for the fiscal year ended December 31, 1995, including the financial
statements, but excluding exhibits. Requests for copies of either such report
should be directed to the Company, Attention: Secretary.
By Order of the Board of Directors,
ELYSE BETH SILVERBERG
Secretary
October 15, 1996
-11-
<PAGE>
PROXY CARD
PROXY PROXY
- ----- -----
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock or Class B Common Stock, as
the case may be, of U.S.-CHINA INDUSTRIAL EXCHANGE, INC., revoking all proxies
heretofore given, hereby constitutes and appoints Roberta Lipson and Lawrence
Pemble, and each of them, Proxies, with full power of substitution, for the
undersigned and in the name, place and stead of the undersigned, to vote all of
the undersigned's shares of said stock, according to the number of votes and
with all the powers the undersigned would possess if personally present, at a
Special Meeting of Shareholders of U.S.-CHINA INDUSTRIAL EXCHANGE, INC., to be
held at the offices of the Company, 7201 Wisconsin Avenue, Bethesda, Maryland,
on Monday, October 28, 1996 at 10:30 A.M., New York City time, and at any
adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter that may come before the meeting. Where no
choice is specified, this Proxy will be voted FOR Proposal 1 set forth on the
reverse side.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL 1
1. Proposal to amend the Company's Restated Certificate of Incorporation, as
previously amended, to increase the number of authorized shares of Common
Stock, par value $.01 per share, from 18,000,000 to 28,000,000.
FOR [_] AGAINST [_] ABSTAIN [_]
2. The proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting.
The shares represented by this proxy will be voted in the manner
directed. In the absence of any direction, the shares will be voted FOR Proposal
1 and in accordance with their discretion on such other matters as may properly
come before the meeting.
Dated: _____________________, 1996
----------------------------------
----------------------------------
Signature(s)
(Signature(s) should conform to
names as registered. For jointly
owned shares, each owner should
sign. When signing as attorney,
executor, administrator, trustee,
guardian or officer of a
corporation, please give full
title.)
PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY
<PAGE>
EXHIBIT A
FORM OF PROPOSED AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF U.S.-CHINA INDUSTRIAL EXCHANGE, INC. UNDER
SECTION 805 OF THE NEW YORK BUSINESS CORPORATION LAW
The first paragraph of ARTICLE FOURTH of the Restated Certificate of
Incorporation, as now in force and effect, is hereby amended by eliminating said
first paragraph of ARTICLE FOURTH thereof in its entirety and substituting in
lieu thereof the following:
"FOURTH:
The aggregate number of shares of capital stock which the
Corporation is authorized to issue is 35,000,000 shares,
consisting of 28,000,000 shares of Common Stock of the par
value of $.01 per share, 2,000,000 shares of Class B
Common Stock of the par value of $.01 per share and
5,000,000 shares of Preferred Stock of the par value of
$.01 per share."
