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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of earliest event reported): FEBRUARY 19, 1996
REGAL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-8334 75-1071589
(State of other (Commission (I.R.S. Employer
jurisdiction) File Number) Identification No.)
</TABLE>
P. O. BOX 1237, CORSICANA, TEXAS 75151
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code: (903) 872-3091
INDEX OF EXHIBITS LOCATED ON PAGE 7 OF 44
Page 1 of 44
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 19, 1996, the Registrant consummated a transaction whereby
the Registrant acquired all the issued and outstanding shares of Acewin
Profits Limited, a British Virgin Islands corporation ("Acewin"), from China
Strategic Holdings Limited, a Hong Kong company ("CSH") pursuant to the terms
of an Acquisition Agreement, dated as of February 8, 1996. Acewin's sole
asset is a 55% joint venture interest in Wuxi CSI Vibration Isolator Co., Ltd.
("Wuxi"), a Sino-foreign joint venture established in September 1993. The
consideration paid by the Registrant was a $13.5 million Convertible Note
bearing interest at the rate of nine percent (9%) per annum after an initial
six (6) month interest-free period (the "Convertible Note").
The Convertible Note is payable interest only on an annual basis, with
all principal being due and payable on January 31, 1999. The principal and
any unpaid interest owing on the Convertible Note are convertible into shares
of the Common Stock, $0.01 par value, of the Registrant ("Common Stock") at a
conversion price of $0.0302 per share. The principal amount of the
Convertible Note will be reduced if the audited financial statements of Wuxi
for the year ended December 31, 1995 reflect an after-tax profit of less than
$3.0 million. The adjustment is a formula designed to assure the purchase
price paid by the Registrant for the Wuxi interest does not exceed eight (8)
times Wuxi's 1995 after-tax earnings. CSH would own an aggregate of
eighty-four and one-half percent (84.5%) of the Registrant's then outstanding
Common Stock upon conversion of the entire principal balance of the
Convertible
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Note. The Convertible Note is secured by a Pledge Agreement granting CSH a
security interest in the shares of Acewin capital stock.
Wuxi manufacturers vibration isolators (commonly called shock absorbers)
of various kinds for use in cars, trucks, ships, railroad, machinery, power
stations, bridges and mines. The Wuxi plant employs approximately 800
employees and is located near Shanghai, China where three (3) of China's
largest car manufacturers are located. Wuxi's products are sold primarily for
incorporation into other products made or assembled in China and such products
represent approximately 70% of the entire vibrator isolator market in China.
Sales for the fiscal year ended December 31, 1995 were over $12.9 million with
net profit before taxes in excess of $3.3 million.
Immediately following the acquisition of the Acewin shares of Common
Stock and the Wuxi interest and as a condition thereto, the Registrant sold
and transferred the existing operating assets and real property of the
Registrant to a newly formed corporation, Regal (New) International, Inc.
("New Regal") in exchange for New Regal's assumption of all liabilities of the
Registrant, other than the Convertible Note, and $2.5 million, all in
accordance with the terms and conditions of a certain Asset Purchase
Agreement, dated as of February 8, 1996, by and between Registrant and New
Regal. The $2.5 million portion of the purchase price was paid as follows:
$800,000 in cash and the balance by delivery of two (2) Promissory Notes, one
in the principal amount of $900,000 (the "$900,000 Note") and the second in
the principal amount of $800,000 (the "$800,000 Note"). The $900,000 Note
bears interest at 9% per
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annum and is payable in sixty (60) equal monthly installments of principal and
interest. The $800,000 Note bears no interest and is due and payable in one
installment on January 31, 2001. New Regal's obligations under the $900,000 Note
and the $800,000 Note are secured by a pledge of all of the issued and
outstanding shares of capital stock of New Regal. All the issued and outstanding
shares of New Regal are owned by Harlequin Investment Holdings Limited
("Harlequin"). Harlequin is the beneficial owner of approximately fifty-four
percent (54%) of the currently outstanding shares of the Registrant's Common
Stock.
In connection with the above-described transactions, Janak Desai, Nils
Ollquist and Garish Sharma resigned as directors of the Registrant, and Oei
Hong Leong, the Chairman of CSH, Chung Cho Yee Mico, and Ma Wai Man were
elected to fill the vacancies created by such resignations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) The financial statements of Wuxi are currently being prepared and will
be filed by amendment to this Form 8-K within sixty (60) days of the date of
this Form 8-K.
b) The Proforma financial information required to be filed pursuant to
Article 11 of Regulation S-X is being prepared and will be filed by amendment
to this Form 8-K.
c) Exhibits The following exhibits are attached hereto and incorporated
herein by reference:
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EXHIBIT 24. Power of Attorney from Regal International, Inc. to Ira F.
Levy.
EXHIBIT 99-1. Acquisition Agreement, dated as of February 8, 1996, by and
between Registrant and CSH.
EXHIBIT 99-2. 9% Convertible Promissory Note, dated as of February 13,
1996, executed by Registrant and payable to the order of CSH.
EXHIBIT 99-3. Asset Purchase Agreement, dated as of February 8, 1996, by
and between Registrant and New Regal.
EXHIBIT 99-4. Promissory Note, dated February 13, 1996, in the original
principal amount of $900,000 executed by New Regal and
payable to the order of Registrant.
EXHIBIT 99-5. Promissory Note, dated as of February 13, 1996, in the
original principal amount of $800,000 executed by New Regal
and payable to the order of Registrant.
EXHIBIT 99-6. Pledge Agreement, dated as of February 13, 1996, executed by
New Regal and delivered to Registrant to secure payment of
the $900,000 Note and the $800,000 Note.
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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.
DATED: March 6, 1996.
REGAL INTERNATIONAL, INC.
By /s/ Ira F. Levy
-----------------------------
Ira F. Levy, Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT 24. Power of Attorney from Regal International, Inc. to Ira F.
Levy.
EXHIBIT 99-1. Acquisition Agreement, dated as of February 8, 1996, by and
between Registrant and CSH.
EXHIBIT 99-2. 9% Convertible Promissory Note, dated as of February 13,
1996, executed by Registrant and payable to the order of CSH.
EXHIBIT 99-3. Asset Purchase Agreement, dated as of February 8, 1996, by
and between Registrant and New Regal.
EXHIBIT 99-4. Promissory Note, dated February 13, 1996, in the original
principal amount of $900,000 executed by New Regal and
payable to the order of Registrant.
EXHIBIT 99-5. Promissory Note, dated as of February 13, 1996, in the
original principal amount of $800,000 executed by New Regal
and payable to the order of Registrant.
EXHIBIT 99-6. Pledge Agreement, dated as of February 13, 1996, executed by
New Regal and delivered to Registrant to secure payment of
the $900,000 Note and the $800,000 Note.
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EXHIBIT 24
POWER OF ATTORNEY
The undersigned hereby authorizes and designates Ira F. Levy as
attorney-in-fact to execute and file with the Securities and Exchange Commission
on behalf of the undersigned Form 8-K-Current Report for February 19, 1996. Such
authorization and designation shall expire on March 31, 1996.
DATED: March 6, 1996.
REGAL INTERNATIONAL, INC.
BY: /s/ Richard N. Gray
------------------------------------
Richard N. Gray, Chairman
SOLO PAGE
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EXHIBIT 99-1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is dated as of February 8,
1996, by and between Regal International, Inc., a Delaware Corporation (the
"Company"), Acewin Profits Limited ("AP") and China Strategic Holdings Limited,
a Hong Kong Company ("Shareholder").
RECITALS
WHEREAS, Shareholder owns all of the issued and outstanding stock of AP
(the "AP Shares"); and
WHEREAS, AP is a British Virgin Island company and its sole asset is the
100% equity interest in China Machine (Holdings) Ltd. ("CMH") which owns 55% of
a Sino-foreign joint venture known as Wuxi CSI Vibration Isolator Co. ("Wuxi
JV").
WHEREAS, the Company is a U.S. public company required to file reports
under Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act");
and
WHEREAS, the Company desires to acquire all of the AP Shares, and
Shareholder desires to exchange all of the AP Shares from the Company; and
WHEREAS, Shareholder's interest is conditioned upon the divestiture of the
Company's current business assets and operations in exchange for the assumption
of all liabilities and indemnification of the Company from all liability related
to the Company's current business assets.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representation and warranties
hereinafter set forth, the parties agree as follows:
I. EXCHANGE OF THE SHARES AND CONSIDERATION
1.01. SHARES BEING EXCHANGED. Effective at the closing of this Agreement
(the "Closing"), and subject to the terms and conditions of this Agreement,
Shareholder shall assign, transfer and deliver to the Company the AP Shares.
1.02 CONSIDERATION. Subject to the terms and conditions of this Agreement,
and in consideration of the assignment and delivery of the AP Shares to the
Company, the Company shall at Closing pay to Shareholder and/or its designee(s),
and Shareholder and/or its designee(s) shall purchase, acquire and accept from
the Company, an aggregate of Thirteen Million Five Hundred Thousand and No/100
Dollars ($13,500,000.00) (the "Consideration") in the form of a Convertible Bond
with terms and details as shown on the attached Schedule A.
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1.03 ADJUSTMENT OF CONSIDERATION. On or before ninety (90) days subsequent
to the Closing, the principal amount of the Convertible Bond may be
automatically reduced and adjusted downward as herein set forth.
(a) The planned and warranted level of profit after tax ("PAT") for the
operation of the Wuxi JV for the fiscal year ended December 31, 1995 is a
minimum of US $3,000,000.
(b) The statement of operations for Wuxi JV for the period ended December
31, 1995 are currently being audited by independent auditors. Shareholder
convenants and agrees to provide the Company with a copy of the independent
audit of Wuxi JV within twenty (20) days of its completion. The profit before
tax set forth in the independent audit will be referred to herein as the "Actual
PAT."
(c) If the Actual PAT is less than US $3,000,000 the amount of principal
reduction of the Convertible Bond will be calculated in accordance with the
following formula:
Reduction in Principal = [($3,000,000 - Actual PAT) x 8.00] x 55%.
(d) The principal reduction shall be automatic, however, the Shareholder
and AP agree to revise or amend the capital Convertible Bond to reflect the
adjustment.
1.04 CLOSING. The Closing of the transaction contemplated by this Agreement
(the "Closing") shall take place at a place as mutually agreed upon on or before
January 31, 1996.
1.05 METHOD OF CLOSING. The method of closing shall require the parties to
satisfy the conditions specified in Section 5.
II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warranties to the Company as follows, as of the
Closing:
2.01 ORGANIZATION. AP is a corporation duly organized, validly existing and
in good standing under the laws of the British Virgin Islands. CMH is a
corporation duly organized, validly existing and in good standing under the laws
of Hong Kong. CMH and AP each have the corporate power and authority to carry on
its business as presently conducted; and each of AP and CMH is qualified to do
business in all jurisdictions where the failure to be so qualified would have a
material adverse effect on its respective business.
2.02 CAPITALIZATION.
(a) All of the issued and outstanding shares of AP and CMH are duly
authorized, validly issued, fully paid and nonassessable.
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(b) There are no outstanding options, warrants, or rights to purchase
any securities of AP or CMH.
2.03 SUBSIDIARIES AND INVESTMENTS. AP does not own any capital stock or
have any interest in any corporation, partnership or other form of business
organization, other than its 100% ownership interest in CMH. CMH does not own
any capital stock or have any interest in any corporation, partnership or other
form of organization other than its joint venture interests Wuxi JV as described
in the recitals.
2.04 FINANCIAL STATEMENTS. All financial statements provided by Shareholder
with respect to CMH, AP and Wuxi JV have been properly prepared and fairly
present the Company's financial condition and the results of its operations as
of the relevant dates thereof and are not misleading.
2.05 LITIGATION. There is no litigation, proceeding or investigation
pending or threatened against AP or CMH affecting any of its properties,
subsidiaries, or assets against any officer, director, or stockholder or
consultant that might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs or condition of AP
or CMH or their properties or assets, or that might call into question the
validity of this Agreement, or any action taken or to be taken pursuant hereto.
2.06 TITLE TO ASSETS. AP and CMH each has good and marketable title to all
of its assets and properties now carried on its books. The assets of AP and CMH
consist solely of the assets named in the recitals and neither AP nor CMH has
any liabilities, contingent or otherwise.
2.07 NO CONFLICT. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any term or provision of, or constitute a default under,
the Memorandum and Articles of Association of AP or any agreement, contract or
instrument to which AP is a party or by which it or any of its assets are bound.
2.08 AUTHORITY. AP and Shareholder have full power and authority to enter
into this Agreement and to carry out the transactions contemplated herein. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized and approved by
Shareholder and no other corporate proceedings on the part of AP and/or
Shareholder are necessary to authorize this Agreement and the transactions
contemplated hereby.
2.09 WARRANTIES RELATING TO THE WUXI JV. The Shareholder and AP represent
and warrant that as of the date hereof and as of Closing:
(a) Wuxi JV has been validly established and validly exists and
operates as a Sino-foreign equity joint venture in the People's Republic of
China ("PRC") in accordance with the relevant rules and regulations of the PRC
and is validly existing under the laws of PRC and all legal and procedural
requirements and all other formalities concerning the Wuxi JV have been duly and
properly complied with.
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(b) Wuxi JV has obtained all requisite permits, consents or approvals
(including, but not limited to, those relating to environmental pollution)
required in relation to its business and operations.
(c) The financials of CMH and Wuxi JV have been properly prepared and
disclosed to Regal and there has been no material adverse change in the
financial condition of Wuxi JV since the date of the last financial year end.
(d) All capital contributions required to be provided by Shareholder
in accordance with the terms of the joint venture agreement has been injected
into Wuxi JV by Shareholder in full.
(e) The transfer and sale of ownership of AP will not violate the
terms of the joint venture agreement which controls the activities of the joint
venture and the relationship of the joint venturers.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Shareholder as follows, as of
the Closing:
3.01 ORGANIZATION.
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware, has the corporate
power and authority to carry on its business as presently conducted; and is
qualified to do business in all jurisdictions where the failure to be so
qualified would have a material adverse effect on the business of the Company.
(b) The copies of the Certificate of Incorporation of the Company, as
certified by the Secretary of State of Delaware, and the Bylaws of the Company
heretofore furnished to Shareholder are complete and correct copies of the
Articles of Incorporation and the Bylaws of the Company as amended and in effect
on the date hereof. All minutes of meetings and actions in writing without a
meeting of the Board of Directors and shareholders of the Company are contained
in the minute book of the Company and no minutes or actions in writing without a
meeting have been excluded in such minute book.
3.02 Capitalization of the Company. The authorized capital stock of the
Company consists of One hundred fifty million (150,000,000) shares of Common
Stock, par value $0.01 per share, of which 81,806,198 shares shall be issued and
outstanding at the Closing prior to issuance of Consideration. All outstanding
shares are duly authorized, validly issued, fully paid and non-assessable, and
at the Closing the Consideration will be duly authorized, validly issued, fully
paid and non-assessable. Except for such outstanding Shares and options to
purchase 1,100,000 shares, there are no outstanding shares of capital stock or
other securities or other equity interests of the Company or rights of any kind
to acquire such stock, other securities or other equity interests.
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3.03 AUTHORITY. The Company has full power and authority to enter into this
Agreement and to carry out the transactions contemplated herein. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby, and the issuance of the Company Shares in accordance with
the terms hereof, have been duly authorized and approved by the Board of
Directors of the Company and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement; the transactions contemplated
hereby and the issuance of the Consideration in accordance with the terms
hereof.
3.04 NO UNDISCLOSED LIABILITIES. The Company is not subject to any material
undisclosed liability or obligation of any nature, whether absolute, accrued,
contingent, or otherwise and whether due or to become due.
3.05 LITIGATION. There is no litigation, proceeding or investigation
pending or to the knowledge of the Company, threatened against the Company
affecting any of its properties or assets, or, to the knowledge of the company,
against any officer, director or stockholder of the Company that might result,
either in any case or in the aggregate, in any material adverse change in the
business, operations, affairs or condition of the Company or any of its
properties or assets, or that might call in to question the validity of this
Agreement, or any action taken or to be taken pursuant hereto.
3.06 TITLE TO ASSETS. The Company has good and marketable title to all of
its assets and properties now carried on its books including those reflected in
the balance sheet contained in the Company's financial statements, free and
clear of all liens, claims, charges, security interests or other encumbrances,
except as described in the balance sheet included in the Company's financial
statements or on any Exhibits attached hereto.
3.07 CONTRACTS AND UNDERTAKINGS. The Company (including any of its
subsidiaries) has no contracts, agreements, leases, licenses, arrangements,
commitments and other undertakings (collectively "Contracts") to which the
Company or any such subsidiary is a party or by which it or its property is
bound that have not been disclosed to Shareholder. The Company is not in
material default, or alleged to be in material default, under any Contract and,
to the knowledge of the Company, no other party to any Contract to which the
Company is a party is in default thereunder nor, to the knowledge of the
Company, does there exist any condition or event which, after notice or lapse of
time or both, would constitute a default by any party to any such Contract.
3.08 TRANSACTIONS WITH AFFILIATES, DIRECTORS AND SHAREHOLDERS. Except as
set forth on Exhibit 3.09 there are no contracts, agreements, arrangements or
other transactions between the Company, and any officer, director, or 5%
stockholder of the Company, or any corporation or other entity controlled by any
such officer, director or 5% stockholder, a member of any such officer, director
or 5% stockholder's family, or any affiliate of any such officer, director or 5%
stockholder.
3.09 NO CONFLICT. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any term or provision of, or constitute a default under,
the Certificate of
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Incorporation or Bylaws of the Company, or any agreement, contract or instrument
to which the Company is a party or by which it or any of its assets are bound.
3.10 DISCLOSURE. Neither this Agreement nor any other agreement, document,
certificates or written or oral statement furnished to Shareholder by or on
behalf of the Company in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or when taken as a whole omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading.
3.11 FINANCIAL STATEMENTS. The financial statements of the Company (the
"FINANCIAL STATEMENTS") set forth in its public filings (a) were prepared in
accordance with the books and records of the Company; (b) were prepared in
accordance with generally accepted accounting principles consistently applied;
(c) are accurate and fairly present the Company's financial condition and the
results of its operations as of the relevant dates thereof and for the periods
covered thereby; (d) contain and reflect all necessary adjustments and accruals
for a fair presentation of the Company's financial condition and the results of
its operations for the periods covered by said financial statements; and (e)
contain and reflect adequate provisions for all reasonably anticipated
liabilities with respect to the period(s) then ended.
3.12 ABSENCE OF MATERIAL CHANGES. Since the most recent Form 10-Q filing,
except as required or permitted under this Agreement, there has not been:
(a) any material change in the condition (financial or otherwise) of
the properties, assets, liabilities or business of Company, except changes in
the ordinary course of business which, individually and in the aggregate, have
not been materially adverse.
(b) any undisclosed redemption, purchase or other acquisition of any
shares of the capital stock of Company, or any issuance of any shares of capital
stock or the granting, issuance or exercise of any rights, warrants, options or
commitments by the Company relating to their authorized or issued capital stock.
3.13 COMPLIANCE WITH LAW. The Company has in all material respects complied
with and it is now in all material respects in compliance with, all Federal and
State laws applicable to the Company, including that the Company is current in
its SEC filings. The Consideration will be issued in full compliance with all
state and federal securities laws.
IV. COVENANTS AND AGREEMENTS OF THE PARTIES EFFECTIVE PRIOR TO CLOSING
4.01 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing,
Shareholder shall be entitled, through its employees and representatives, to
make such investigations and examinations of the books, records and financial
condition of the Company as Shareholder may request, In order that Shareholder
may have the full opportunity to do so, the Company shall furnish Shareholder
and its representatives during such period with all such information concerning
the affairs of the Com-
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pany as Shareholder or its representatives may reasonably request and cause the
Company's officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with Shareholder or its representatives in connection with such
review and examination and to make full disclosure of all information and
documents requested by Shareholder and/or its representatives. Any such
investigations and examinations shall be conducted at reasonable times and under
reasonable circumstances, it being agreed that any examination of original
documents will be at the Company's premises, with copies thereof to be provided
to Shareholder and/or its representatives upon request.
4.02 COOPERATION; CONSENTS. Prior to the Closing Date, each party shall
cooperate with the other parties to the end that the parties shall (i) in a
timely manner make all necessary filings with, and conduct negotiations with,
all authorities and other persons the consent or approval of which, or a license
or permit from which is required for the consummation of the transactions
contemplated by this Agreement and (ii) provide to each other party such
information as the other party may reasonably request in order to enable it to
prepare such filings and to conduct such negotiations.
4.03 CONDUCT OF BUSINESS. From the date hereof through the Closing, the
Company shall (i) conduct its business in the ordinary course and in such a
manner so that the representations and warranties contained herein shall
continue to be true and correct as of the Closing as if made at and as of the
Closing and (ii) not enter into any transaction not envisioned or required by
this transactions, or incur any liability, without first obtaining the written
consent of Shareholder. Without the prior written consent of Shareholder, except
as expressly set forth herein, the Company shall not undertake or fail to
undertake any action if such action or failure would render any of said
warranties and representations untrue as of the Closing.
4.04 LITIGATION. From the date hereof through the Closing, each party
hereto shall promptly notify the other parties of any lawsuits claims,
proceedings or investigations which after the date hereof are threatened or
commenced against such party or any of its affiliates or any officer, director,
employee, consultant, agent or shareholder thereof, in their capacities as such,
which, if decided adversely, could reasonably be expected to have a material
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or prospects of such party or any of its subsidiaries.
4.05 NOTICE OF DEFAULT. From the date hereof through the Closing, each
party hereto shall give to the other parties prompt written notice of the
occurrence or existence of any event, condition or circumstance occurring which
would constitute a violation or breach of this Agreement by such party or which
would render inaccurate in any material respect any of such party's
representations or warranties contained herein.
V. CONDITIONS TO CLOSING
5.01 CONDITIONS TO OBLIGATION OF SHAREHOLDER. The obligations of
Shareholder under this Agreement shall be subject to each of the following
conditions:
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(a) REPRESENTATIONS AND WARRANTIES OF COMPANY TO BE TRUE. The
representations and warranties of Company herein contained shall be true in all
material respects at the Closing with the same effect as though made at such
time. The Company shall have performed in all material respects all obligations
and complied in all material respects, to its actual knowledge, with all
covenant and conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing.
(b) NO LEGAL PROCEEDINGS. No injunction or restraining order shall be
in effect prohibiting this Agreement, and no action or proceeding shall have
been instituted and, at what would otherwise have been the Closing, remain
pending before the court to restrain or prohibit the transactions contemplated
by this Agreement.
(c) STATUTORY REQUIREMENTS. All statutory requirements for the valid
consummation by the Company of the transactions contemplated by this Agreement
shall have been fulfilled. All authorizations, consents and approvals of all
government and other persons required to be obtained in order to permit
consummation by the Company of the transactions contemplated by this Agreement
shall have been obtained.
(d) DIRECTOR RESIGNATION. Prior to the Closing, all of the directors
and officers of the Company shall have submitted their contingent resignations
to Goins, Underkofler, Crawford & Langdon, LLP to be held in escrow and to
become effective at the Closing. All resignations shall contain a statement that
each of the directors and officers has no claim whatsoever against the Company.
Before the resignations take effect, if required by Shareholder, the directors
shall cause such persons nominated by the Shareholder to become new directors of
the Company.
(e) ASSET PURCHASE AGREEMENT. The Company and Harlequin Investment
Holdings Limited shall have entered into a certain Asset Purchase Agreement
providing for the sale to Harlequin Investment Holdings Limited, or its
subsidiary, all of the operating assets of the Company and the transferee shall
have assumed all of the liabilities, actual and contingent, of the Company as of
the Closing all in accordance with the terms of the Asset Purchase Agreement.
Such transfer and assumption shall take place within two (2) weeks after the
transfer to the Company of the CMH Shares. In connection with the foregoing, all
affiliates and/or related parties shall have released the Company from any
obligation or liability existing as of the Closing.
5.02 CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of the Company
under this Agreement shall be subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER AND AP TO BE TRUE.
The representations and warranties of Shareholder and AP herein contained shall
be true in all material respects as of the Closing, and shall have the same
effect as though made at the Closing; Shareholder and AP shall have performed in
all material respects to all obligations and complied in all material respects,
with all covenants
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and conditions required by this Agreement to be performed or complied with by
them prior to the Closing.
(b) NO LEGAL PROCEEDINGS. No injunction or restraining order shall be
in effect, and no action or proceeding shall have been instituted and, at what
would otherwise have been the Closing, remain pending before the court to
restrain or prohibit the transactions contemplated by this Agreement.
(c) STATUTORY REQUIREMENTS. All statutory requirements for the valid
consummation by Shareholder of the transactions contemplated by this Agreement
shall have been fulfilled. All authorizations, consents and approvals of all
governments and other persons required to be obtained in order to permit
consummation by Shareholder of the transactions contemplated by this Agreement
shall have been obtained
(d) LENDER APPROVAL. The transactions contemplated herein shall have
approved by Fremont Financial Corporation, the holder of the first lien on the
Company's assets.
(e) SHAREHOLDER REPRESENTATION AND COMFORT LETTER. The Shareholder
shall deliver to the Company, its directors and stockholders, the Representation
and Comfort Letter in the form attached as Schedule B.
VI. MISCELLANEOUS
6.01 FURTHER ASSURANCES. From time to time, at the other party's request
and without further consideration, each of the parties will execute and deliver
to the others such documents and take such action as the other party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.
6.02 EXPENSES OF SALE. Except as otherwise provided herein, each party
shall bear its own direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation and
performance of the transactions contemplated herein. Without limitation, such
expenses shall include the fees and expenses of all attorneys, brokers,
investment bankers, accountants, agents and finders and other professionals
incurred in connection herewith, acting on behalf of such party. The parties
shall indemnify each other against any claims, costs, losses, expenses or
liabilities arising from any claim or commissions, finder's fees or other
compensation in connection with the contemplated transactions which may be
asserted by any person based on any agreement or arrangement for payment by the
other party.
6.03 USE AND CONFIDENTIALITY. All of the information, records, books, and
data to which the parties are given access as set forth herein shall be used by
the parties solely for the purpose of confirming the representations and
warranties set forth herein. Subject to any obligation to comply with (i) any
law (ii) any rule or regulation of any authority or securities exchange or (iii)
any subpoena or other legal process to make information available to the persons
entitled thereto, whether or not the transactions contemplated herein shall be
concluded, all information obtained by any
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<PAGE> 10
party about any other, and all of the terms and conditions of this Agreement,
shall be kept in confidence by each party, and each party shall cause its
shareholders, directors, trustees, officers, employees, agents and attorneys to
hold such information confidential. Such confidentiality shall be maintained to
the same degree as such party maintains its own confidential information and
shall be maintained until such time, if any, as any such data or information
either is, or becomes, published or a matter of public knowledge; provided,
however, that the foregoing shall not apply to any information obtained by
either party through its own independent investigations of the other party or
received by such party from a third party not under any obligation to keep such
information confidential nor to any information obtained by such party which is
generally known to others engaged in the trade or business; and provided,
further, that from and after the Closing, such party shall be under no
obligation to maintain confidential any such information concerning the other
party. If this Agreement shall be terminated for any reason, each party shall
return or cause to be returned to the other all written data, information,
files, records and copies of documents, worksheets and other materials obtained
by such party in connection with the transactions contemplated herein.
6.04 NOTICES. All notices, requests and other communications thereunder
shall be in writing and shall be delivered by courier or other means of personal
service (including by means of a nationally recognized courier service or
professional messenger service), or sent to telex or telecopy or mailed first
class, postage prepaid, by certified mail, return receipt requested, or by
Federal Express or other reputable overnight delivery service, in all cases,
addressed to:
To Shareholder: China Strategic Holdings Limited
52F Bank of China Tower
1 Garden Road
Hong Kong
Attn: Mr. Chung Cho Yee, Mico
Executive Director
To Company: Regal International, Inc.
P.O. Box 1237
Corsicana, Texas 75151
Attn: President
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgment or
other evidence of actual receipt or delivery to the address. In case of service
by telecopy, a copy of such notice shall be personally delivered or sent by
registered or certified mail, in the manner set forth above, within three (3)
business days thereafter. Either party hereto may from time to time by notice in
writing served as set forth above designate a different address or a different
or additional person to which all such notices or communications thereafter are
to be given.
6.05 PARTIES IN INTEREST. Except as otherwise expressly provided herein,
all the terms and provisions of this Agreement shall be binding upon, shall
inure to the
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<PAGE> 11
benefit of and shall be enforceable by the respective heirs, beneficiaries,
personal and legal representatives, successors and assigns of the parties
hereto.
6.06 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including the Schedules,
Exhibits and other documents and writings referred to herein or delivered
pursuant hereto, which form a part hereof, contain the entire understanding of
the parties with respect to its subject matter. There are no restrictions,
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly executed
by the parties or their respective successors or assigns.
6.07 HEADINGS, ETC. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretations of this Agreement.
6.08 PRONOUNS. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
6.09 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
6.10 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California applicable to contracts to be performed in the State of
California.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as the date first above written.
REGAL INTERNATIONAL, INC.
By: /s/ RICHARD N. GRAY
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
CHINA STRATEGIC HOLDINGS, LTD.
By: /s/ MICO CHUNG
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
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<PAGE> 12
EXHIBIT 3.09
Except for the transaction disclosed in filings made by the Company and
Harlequin Investment Holdings Limited with the U.S. Securities and Exchange
Commission, all of which are public record, there are no contracts, agreement,
arrangements or other transactions between the Company, and any officer,
director, or 5% stockholder of the Company, or any corporation or other entity
controlled by any such officer, director or 5% stockholder, a member of any such
officer, director or 5% stockholder's family, or any affiliate of any such
officer, director or 5% stockholder.
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<PAGE> 13
SCHEDULE A
TERMS OF THE CONVERTIBLE BOND:
1. ISSUER
Regal International, Inc., a Delaware corporation
2. BONDHOLDER
China Strategic Holdings Limited or its nominee
3. PRINCIPAL AMOUNT
US $13.5 Million
4. REPAYMENT TERM
(a) The principal of the Bond is due and payable in full in cash three (3)
years from the date of issue. The Issuer has the right to call for
early redemption by giving reasonable notice to the Bondholder.
(b) The interest on the Bond accrues at nine percent (9%) per annum and is
payable as follows:
(i) No interest will accrue on the Bond during the first six months
from the date of issue;
(ii) Accrued Interest will be due and payable annually to be charged
after the first six months period; and
(iii) All interest payable annually.
5. CONVERSION
The Bondholder will have the right at any time from the date of issue to
convert the outstanding principal and interest on the Bond, in whole or any part
or parts, into common stock of the Issuer at the conversion price.
6. CONVERSION PRICE
The initial conversion price is US $0.0302 per share subject to adjustment
in the event that any alteration in the capital structure of the Issuer while
any part of the Bond remains outstanding, whether by way of capitalization of
profits or reserves, rights issue, consolidation or reduction of the share
capital of the Issuer or otherwise howsoever, as the Auditors shall at the
request of the Issuer or the Bondholder certify in writing to be in their
opinion fair and reasonable, provided that such alterations
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<PAGE> 14
shall be made on the basis that no such alterations shall be made the effect of
which would be to enable a capital stock to be issued at less than its nominal
value or which would give the Bondholder a different proportion of the issued
share capital of the Issuer as that to which he was previously entitled and on
alteration shall be made if any alteration in the capital structure of the
Issuer is the result of an issue of Shares as consideration in a transaction.
The capacity of the Auditors in this paragraph is that of experts and their
certification shall be final and binding on the Issuer and the Bondholder.
7. OTHER RIGHT
If while any part of the Bond is outstanding, a general offer is made to
shareholders of the Issuer to acquire the whole or any part of the issued share
capital of the Issuer, the Issuer is required to use its reasonable endeavors to
procure that a similar offer is extended in respect of the Bond or in respect of
any Shares issued on conversion of the Bond during the period of the offer,
unless the prior written approval of the Bondholder is obtained.
8. VOTING
The Bondholder will not be entitled to attend or vote at any meetings of
the Stockholders of the Issuer by reason only of it being the Bondholder.
9. TRANSFERABILITY
The Bond can only be transferred to any group company of the Bondholder on
the condition that a further transfer of the Bond to another group company of
the Bondholder will be made in the event that the transferee company ceases to
be a group company of the Bondholder.
10. UNREGISTERED SHARES
The shares of common stock of the Issuer to be received upon conversion of
the Bond have not and it is anticipated will not have been registered under the
Securities Act of 1933, as amended. Bondholder agrees it will execute an
Investment Letter recognizing that such shares will be unregistered shares.
"The Issuer agrees to charge in favour of the Notoeholder all assets of
Acewin Profits Limited and its related subsidiaries by way of continuing
security for the due and punctual payment to the Noteholder of all sums
(including principal and interest)."
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<PAGE> 15
REPRESENTATION AND COMFORT LETTER
The undersigned, China Strategic Holdings Limited ("CSH"), hereby
represents to the Board of Directors of Regal International, Inc. (the
"Directors") that, in the opinion of CSH based upon the financial and other
information available, the justifiable commercial value of the shares of
capital stock of Acewin Profits (the "Shares") are equal to approximately US
$13.5 million and the earnings of Wuxi CSI Vibration Isolator Co. (Wuxi JV) for
the 1995 fiscal year per management accounts are not less than US $3.0 million.
The foregoing representations are being made to the Directors in order
to provide comfort to the Directors prior to such Directors approving the
acquisition of the Shares without first performing independent due diligence.
CSH hereby indemnifies Regal and each of its officers and directors in
office on January 22, 1996 from any claims, reasonable costs, liabilities and
expenses, including reasonable attorneys' fees, suffered or incurred by Regal
or any such officer or director in connection with or arising as a direct
consequence of Regal's purchase of the Shares or the breach of any of the
representations contained herein.
EXECUTED as of January , 1996.
CHINA STRATEGIC HOLDINGS, LTD.
Page 23 of 44
<PAGE> 1
EXHIBIT 99-2
This security has not been registered with the Securities and Exchange
Commission, or the Securities Commissioner of the State of Domicile of
Subscriber, but has been issued pursuant to the private offering
exemption under the Securities Act of 1933, as amended (the "Act"),
and the private offering exemption under the securities laws of the
State of Delaware and Texas, and the registered holder of such
security has executed an investment representation with respect
thereto. Accordingly, the sale, transfer, pledge, hypothecation or
other disposition of this security is restricted and may not be
accomplished except in accordance with the Act and the applicable
rules adopted under it and with the permission of the Company upon the
furnishing of an opinion of counsel satisfactory to counsel for the
Company that registration is unnecessary for such transactions.
REGAL INTERNATIONAL, INC.
9% SECURED CONVERTIBLE PROMISSORY NOTE
US $ 13,500,000
Regal International, Inc. (the "Company" or "Maker"), a Delaware
corporation, for value received, hereby promises to pay to China Strategic
Holdings Limited, a Hong Kong Company, the principal amount of US $13,500,000
with interest (computed on the basis of a 365-day year) on the unpaid balance of
such principal amount at the rate of 9% per annum from August 1, 1996, until
maturity. Accrued interest on this Note shall be due and payable on each
anniversary date hereof. Principal and any unpaid interest on this Note shall be
due and payable on January 31, 1999. Payment of principal and interest shall be
made in lawful money of the United States of America in federal or other
immediately available funds at the registered address of the registered holder
of this Note as set forth in the register kept by the Company at its principal
office for the purpose of registration of the Note referred to below. Any amount
of principal and interest in default under this Note shall bear interest at the
highest lawful rate or if there be no highest lawful rate at eighteen percent
(18%) per annum.
SECTION 1. SECURITY FOR THE NOTE.
Payment of this Note is secured by a security interest and pledge of all
the outstanding shares of Acewin Profits Limited, a British Virgin Islands
Company (the "Shares"), all as set forth in a Pledge Agreement of even date
herewith.
SECTION 2. CONVERSION OF NOTE.
2.1 Subject to and upon compliance with the provisions of this Section 2,
at the option of the holder thereof, this Note may at any time on or before the
maturity hereof, be converted at the principal amount thereof and accrued
interest thereon into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/1OOth of a share) of Common Stock, $0.01 par value,
of the Company (the "Common Stock"), at the conversion price, determined as
hereinafter provided, in effect at the time of conversion.
2.2 The conversion price (herein called the "Conversion Price") shall be US
$0.0302 per share of Common Stock. The Conversion Price shall be subject to
Page 24 of 44
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<PAGE> 2
adjustment from time to time as herein provided. The Conversion Price prior to
any adjustment and the adjusted Conversion Price after each adjustment are
hereinafter referred to as the actual Conversion Price.
SECTION 3. RESTRICTIONS ON TRANSFER; COMPLIANCE WITH SECURITIES ACT.
A. The holder acknowledges that the securities issued upon conversion of
the Note is characterized as "restricted securities" under the federal
securities laws since they are being acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the Act
only in compliance with certain conditions and under limited circumstances,
including the following:
(i) A registration statement with respect thereto has become effective
under the Act, or
(ii) There is presented to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that registration under the
Act is not necessary; or
(iii) There is presented to the Company a letter from the staff of the
Securities and Exchange Commission to the effect that the staff will not
recommend that said Commission take any action in respect of such offer or
transfer and to the effect that said staff concurs in the opinion that such
registration or compliance is not necessary (provided that the Company
reasonably agrees with the facts stated in such letter insofar as they pertain
to it); or
(iv) There is presented to the Company written evidence that the sale,
pledge or transfer complies with the provisions of Rule 144 as amended under the
Act.
B. It is understood that the certificates evidencing the Common Stock
issuable upon conversion of this Note, when issued, will bear legends
substantially to the following effect:
"THE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION, BUT HAS BEEN ISSUED PURSUANT TO THE PRIVATE
OFFERING EXEMPTION UNDER THE SECURITIES ACT OF 1993, AS AMENDED
(THE "ACT"), AND THE PRIVATE OFFERING EXEMPTION UNDER THE
SECURITIES LAWS OF THE STATES OF DELAWARE AND TEXAS, AND THE
REGISTERED HOLDER OF SUCH SECURITY HAS EXECUTED AN INVESTMENT
REPRESENTATION WITH RESPECT THERETO. ACCORDINGLY, THE SALE,
TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS
SECURITY IS RESTRICTED AND MAY NOT BE ACCOMPLISHED EXCEPT IN
ACCORDANCE WITH THE ACT AND THE APPLICABLE RULES ADOPTED UNDER IT
AND WITH THE PERMISSION OF THE COMPANY UPON THE FURNISHING OF AN
OPINION OF COUNSEL SATISFACTORY TO COUNSEL FOR THE COMPANY THAT
REGISTRATION IS UNNECESSARY FOR SUCH TRANSACTIONS."
C. This Note shall be non-transferable except to a group, company or
affiliate of CSH ceases to be group, company or affiliate of CSH, this Bond must
be transferred to CSH or another group or affiliated company.
Page 25 of 44
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<PAGE> 3
SECTION 5. ADJUSTMENT OF PURCHASE RIGHTS.
A. For the purposes of this Note, the following provisions shall be
applicable:
If at any time or from time to time the Company shall by subdivision,
consolidation or reclassification of shares, or otherwise, change as a whole the
outstanding shares of its Common Stock into a different number or class of
shares, then the number and class of shares as so changed shall replace the
shares outstanding immediately prior to such change, and the Purchase Price and
the number of shares purchasable under each Note shall be correspondingly
adjusted.
B. Upon each adjustment of the Conversion Price and upon each change in the
number of shares of Common Stock deliverable upon the conversion of this Note,
and in the event of any change in the rights of the holders of this Note by
reason of other events hereinabove set forth, the Company shall forthwith give
written notice thereof to the holder of this Note in the form of a certificate,
executed by its President or one of its Vice Presidents, stating the adjusted
Conversion Price and the new number of shares so deliverable, or specifying the
other shares of stock, securities or assets and the amount thereof so
deliverable and setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
SECTION 6. SPECIAL AGREEMENTS OF THE COMPANY.
A. The Company does not have sufficient authorized and reserved shares of
Common Stock to issue to the holder of this Note upon conversion. The Company
agrees to call a meeting of Stockholders of the Company to approve an Amendment
to the Articles of Incorporation increasing the number of shares of Common Stock
authorized for issuance. After such amendment to the Articles of Incorporation,
the Company covenants and agrees that it will reserve and set apart and have at
all times a number of shares of authorized but unissued Common Stock deliverable
upon the conversion of this Note or any other rights or privileges provided for
therein sufficient to enable it at any time to fulfill all its obligations
thereunder.
B. If, at any time while this Note is outstanding, the Company shall at any
time consolidate with or merge into another corporation, the holder hereof will
thereafter receive a security of such other corporation substantially similar to
this Note convertible into the securities or property to which a holder of the
same number of shares of Common Stock then deliverable upon the conversion
hereof would have been entitled upon such consolidation or merger, and the
Company shall take such steps in connection with such consolidation or merger as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or
property thereafter deliverable upon the conversion of this Note. A sale of all
or substantially all the assets of the Company for securities of another company
shall be deemed a consolidation or merger for the foregoing purposes.
SECTION 7. PREPAYMENT.
This Note may be prepaid, in whole or in part, at any time provided that
the Company gives the holder of this Note at least thirty (30) days prior
written notice of its intention to prepay and the opportunity to convert this
Note into shares of Common Stock.
Page 26 of 44
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<PAGE> 4
SECTION 8. TAKE ALONG AGREEMENT.
If this Note is outstanding and a general offer is made to the Stockholders
of the Company (as a group) to acquire all or any portion of the outstanding
shares of Common Stock, the Company shall be required (a) to notify the holder
hereof of the offer, and (b) to use its best efforts to have such offer extended
to the shares of Common Stock issuable upon conversion of this Note, unless the
holder hereof advises the Company in writing of its desire not to sell its
shares of Common Stock pursuant to the offer.
SECTION 9. MISCELLANEOUS.
As used herein, the term "Highest Lawful Rate" means the maximum
nonusurious interest rate, if any, that, at any time and from time to time, may
be contracted for, taken, reserved, charged, or received with respect to the
purchase money loan evidenced by this Note under the laws of the United States
and the State of Delaware applicable to the holder hereof and such loan. It is
the intention of Payee and each holder hereof to conform strictly to the
applicable usury laws now or hereafter in force, and therefore, all agreements
between Maker and Payee are expressly limited so that in no contingency or event
whatsoever, whether by reason of advancement of the proceeds hereof,
acceleration of maturity of the unpaid principal balance hereof, or otherwise,
shall the amount paid or agreed to be paid to the holder hereof for the use,
forbearance, or detention of the money to be advanced hereunder exceed the
Highest Lawful Rate. If any term hereof is susceptible of being construed as
obligating Maker for the payment of interest in excess of that authorized by
applicable law, or if, from any other circumstances whatsoever, including, but
not limited to, acceleration of the maturity of the indebtedness evidenced
hereby, fulfillment of any provision hereof or of any other agreement referred
to herein, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstance the holder hereof shall ever receive or be entitled to receive as
interest an amount which would exceed the Highest Lawful Rate, such amount which
would be excessive interest shall be cancelled automatically as of the date of
the occurrence of such circumstance, and if theretofore paid, at the election of
the Maker, shall be either refunded, credited on the principal amount hereof, or
applied to the future payment of interest to become due hereunder, and in such
event no holder shall be subject to any penalties provided by law for
contracting for, charging, or receiving interest in excess of the Highest Lawful
Rate. This provision shall control every other provision of all agreements
between the undersigned and the holder hereof.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, Maker and all endorsers, guarantors and sureties
of this Note jointly and severally agree to pay in addition to the principal and
interest due and payable hereon reasonable attorneys' and collection fees.
The Maker of this Note waives presentment for payment, demand, notice of
demand and of dishonor of this Note, notice of intention to accelerate the
maturity of this Note, notice of such acceleration, protest and notice of
protest, diligence in collecting.
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<PAGE> 5
All of the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of Maker or Payee shall bind their respective
successors and assigns, whether so expressed or not.
In the event any one or more of the provisions contained in this Note shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Note shall be construed as if such invalid, illegal,
or unenforceable provision had never been contained herein.
EXECUTED this 13th day of February, 1996, but effective as of January 31,
1996.
REGAL INTERNATIONAL, INC.
By: /s/ Janak Desai
-------------------------------
Janak Desai, President
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<PAGE> 1
EXHIBIT 99-3
ASSET PURCHASE AGREEMENT
This Agreement is between Regal International, Inc., a Delaware corporation
("SELLER") and New Regal International, Inc., a wholly owned subsidiary of
Harlequin Investment Holdings Limited, a British Virgin Islands Company,
("PURCHASER") and Harlequin Investment Holdings Limited ("HARLEQUIN").
* * * * * *
A. Seller and its subsidiaries are primarily engaged in (i) the
manufacturing and selling of various expendable rubber products, and (ii) in
providing oil field safety (the "COMPANY BUSINESS").
B. Seller desires to sell to Purchaser and Purchaser desires to purchase
from Seller, various assets of Seller on the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
promises and covenants contained herein, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the
conditions set forth below, on the Closing Date (as defined in Section 10
below), Seller shall sell, transfer and deliver to Purchaser and Purchaser shall
purchase from Seller, the following property and assets owned by Seller, prior
to China Strategic Holding Limited's transfer of assets to Seller,
(collectively, the "SELLER'S PROPERTIES"):
(a) All of the furniture, fixtures, equipment and supplies of Seller;
(b) All inventory work in process and raw materials;
(c) All real property of Seller reflected in the balance sheet of Seller
as of closing;
(d) All rights of Seller under executory contracts (the "CONTRACTS");
(e) All accounts, accounts receivable and general intangibles;
(f) All books and records of Seller relating to Seller's assets and
properties, exclusive of Seller's corporate minute book, corporate seal and
stock records;
(g) All cash - all bank accounts or money on deposit relating to
Seller's Properties held by or on behalf of Seller on the date of Closing;
(h) All vehicles and rolling stock;
(i) The name "Regal International"; and
Asset Purchase Agreement Page 1
Page 29 of 44
<PAGE> 2
(j) The outstanding shares of capital stock of Regal Rubber Products,
Inc. and Bell Petroleum Services, Inc.
Seller's Properties will not include outstanding shares of capital stock of
Acewin Profits Limited or the $800,000 cash paid at Closing hereunder.
2. PURCHASE PRICE. The purchase price for Seller's Properties is Two
Million Five Hundred Thousand and No/100 Dollars ($2,500,000) and Purchaser's
assumptions of all liabilities (including contingent liabilities) of the Seller
on the date of Closing.
3. PAYMENT OF PURCHASE PRICE; SECURITY: The purchase price shall be paid
as follows:
(a) On the Closing Date, Purchaser shall pay Seller $800,000 cash;
(b) On the Closing Date, Purchaser shall deliver to Seller its
convertible promissory note, dated as of the Closing Date, in the principal
amount of $900,000, bearing interest at nine percent (9%) per annum and being
payable (principal and interest in sixty (60) equal monthly installments of
$18,682 (the "NOTE"), said Note to be convertible on each anniversary date
thereof into shares of common stock of Purchaser at a conversion price based on
the net book value of the Purchaser's most recent audited annual balance sheet.
Said option to convert must be exercised within thirty (30) days of Seller's
receipt of the audited balance sheet. Said Note shall contain language which
allows prepayment in whole or in part after notice to Seller and opportunity (60
days after notice) for Seller to convert. Notwithstanding anything contained
herein to the contrary, the Note shall never be convertible into shares of
common stock of Purchaser which exceeds forty-nine percent (49%) of the total
number of outstanding shares on a fully diluted basis and the issuance of shares
of common stock of Purchaser for a consideration in excess of the conversion
price shall not result in dilution or a reduction in the conversion price.
(c) On the Closing Date, Purchaser shall deliver to Seller its
promissory note in the principal amount of $800,000 bearing no interest and
being due and payable on the fifth (5th) anniversary thereof (the "$800,000
NOTE");
(d) Purchaser's agreement to assume, repay or be liable for all
obligations or liabilities of Seller incurred, accrued or arising from the
operation or use of the Seller's Properties prior to the Closing Date, including
but not limited to all secured debt and debt to Subordinated Noteholders. In
addition, the Purchaser shall assume all obligations under all Contracts or
similar obligations; and
(e) The Note and $800,000 Note shall be secured by the pledge to Seller
by Harlequin of all the outstanding shares of the Purchaser and by a second lien
on the assets of the Purchaser.
Asset Purchase Agreement Page 2
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<PAGE> 3
4. INDEMNITIES.
(a) Except as expressly provided in this Agreement, Seller shall not be
obligated to assume, repay or be liable for any obligations or liabilities of
Purchaser incurred, accrued or arising from the operation of the Seller's
business after the Closing Date, it being expressly understood and agreed by the
parties that all such obligations and liabilities shall be discharged solely by
Purchaser.
(b) Purchaser shall indemnify and hold Seller harmless from any and all
damages, losses, costs, expenses, liabilities or obligations (including
reasonable attorneys' fees) asserted against Seller by reason of or arising (a)
from the obligations and liabilities assumed by Purchaser, (b) from Purchaser's
operations after the Closing Date and (c) from any misrepresentation, breach of
covenant or warranty or non-fulfillment of any term, provision or condition of
Purchaser under this Agreement.
5. PRORATIONS. There shall be no proration of real or personal property
taxes assessed on Seller's Properties.
6. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Purchaser as follows:
(a) Seller is a corporation duly organized and existing in good standing
under the laws of the State of Delaware.
(b) Seller has corporate power and requisite authority to execute,
deliver and perform this Agreement and the transactions contemplated hereby.
Seller is duly authorized to execute, deliver and perform this Agreement and is
and will continue to be duly authorized to perform this Agreement through the
Closing Date. Seller has taken all corporate action necessary to authorize the
execution, delivery and performance of this Agreement by Seller.
(c) This Agreement is a legal and binding obligation of Seller and
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of
creditor's rights.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby warrants
and represents to Seller as follows:
(a) Purchaser is a corporation duly organized and validly existing.
(b) Purchaser has the corporate power and authority to execute, deliver
and perform this Agreement and the transactions contemplated herein. Purchaser
is duly authorized to execute, deliver and perform this Agreement and is and
will continue to be duly authorized to perform this Agreement and the
transactions contemplated hereby. Purchaser has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement.
(c) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated herein, will contravene or
Asset Purchase Agreement Page 3
Page 31 of 44
<PAGE> 4
conflict with any provision of law, statute or regulation to which Purchaser is
subject or any indenture, mortgage, deed of trust, security agreement, loan
agreement or other agreement to which Purchaser is a party or which Purchaser
may be bound or violate any provision of the articles of incorporation or bylaws
of Purchaser. No consent, approval, authorization or order of any court or
governmental authority or third party is required in connection with the
execution, delivery and performance by Purchaser of this Agreement.
(d) This Agreement is the legal and binding obligation of Purchaser,
enforceable in accordance with its terms except as may be limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of
creditor's rights.
(e) Purchaser has not incurred any finder's fee or is obligated for any
broker's fee in connection with this Agreement.
8. OPERATIONS OF COMPANY BUSINESS BY SELLER AND PURCHASER'S AGREEMENT. From
the date of this Agreement through the Closing Date, (i) Seller shall carry on
the Company Business diligently and substantially in the same manner as
previously conducted; (ii) provide Purchaser with full access during normal
business hours to all of Seller's Properties, books and records of the Seller
and to reasonably cooperate with Purchaser's efforts to apply for and obtain any
and all licenses or permits necessary to conduct the Company Business; (iii)
comply with all applicable laws and agreements of Seller or Seller's Properties
and (iv) maintain in effect any insurance coverage now in effect on Seller's
Properties.
9. AGREEMENT OF HARLEQUIN. Immediately after the Closing, Harlequin will
convert $1,700,000 of the debt owing from Seller to Harlequin and assumed by the
Purchaser into equity of the Purchaser, thereby reducing the debt assumed by the
Purchaser by such amount.
10. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE. The
obligation of Purchaser to consummate the transactions contemplated under
this Agreement shall be subject to and conditioned upon satisfaction on or
before the Closing Date of all of the following conditions:
(a) Purchaser's receipt of all consents, licenses or permits from the
applicable governmental authorities which are necessary or appropriate for
Purchaser to acquire and hold Seller's Properties as contemplated by this
Agreement, including, without limitation, all consents deemed necessary or
appropriate by Seller for the sale or assignment of the Contracts to Purchaser.
(b) Seller's delivery to Purchaser of a Bill of Sale and Assumption of
Liabilities for Seller's Properties conveying good and marketable title to
Seller's Properties subject to the Liabilities.
(c) The written consent and approval of Fremont Financial Corporation ,
the holder of the first lien on the Seller's Properties, to the sale of such
Seller's Properties to Purchaser.
Asset Purchase Agreement Page 4
Page 32 of 44
<PAGE> 5
(d) All representations and warranties of Seller in this Agreement are
true and correct as of the Closing Date. Seller shall have executed and
delivered all documents, instruments and items necessary or appropriate to
effectuate the transactions contemplated by this Agreement.
11. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS TO CLOSE. The
obligations of Seller to consummate the transactions contemplated under this
Agreement shall be subject to and conditioned upon satisfaction on or before
the Closing Date of all of the following conditions:
(a) No material adverse change shall have occurred in the Seller's
Properties or Seller's business.
(b) All representations and warranties of Purchaser in this Agreement
are true and correct as of the Closing Date.
(c) The prior consummation of the acquisition by Seller of the issued
and outstanding stock of Acewin Profits Limited as described in that certain
Acquisition Agreement by and between Seller and China Strategic Holdings
Limited.
(d) Delivery by Purchaser of an executed Representation and Comfort
Letter in substantially the same form as Schedule A attached hereto.
12. CLOSING. The closing of the transactions contemplated by this Agreement
shall take place on January 31, 1996, provided, however, that if any of the
conditions precedent to Closing set forth herein have not been met, satisfied,
or waived by said date, then the Closing shall take place on a subsequent date
as determined by the Purchaser and Seller, but in no event later than February
28, 1996. At the Closing, Seller shall deliver to Purchaser possession of
Seller's Properties.
13. TERMINATION. If Purchaser or Seller is unable to obtain the required
approvals and consents to this Agreement and all necessary and appropriate
licenses, consents or other governmental approval to acquire and hold Seller's
Properties, then such party may terminate this Agreement and then Purchaser
shall be entitled to an immediate refund of any monies paid to Seller. If
Purchaser fails to perform this Agreement for any reason other than as stated in
the preceding sentence, Seller may pursue all remedies available under
applicable law. If Seller fails to perform this Agreement for any reason other
than as stated in this Section 12 Purchaser may pursue all remedies available
under applicable law.
14. MISCELLANEOUS.
(a) WAIVER. The failure of a party to enforce any provision of this
Agreement shall not constitute a waiver of such party's right to thereafter
enforce such provision or to enforce any other provision at any time.
Asset Purchase Agreement Page 5
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<PAGE> 6
(b) FURTHER ASSURANCES. Each party Seller shall duly execute and
deliver all such further acts, deeds, assignments, transfers, conveyances and
other assurances as may be necessary or appropriate to consummate the
transactions contemplated by this Agreement.
(c) MODIFICATION. The terms of this Agreement cannot be modified except
by a written instrument signed by the party to be charged.
(d) ENTIRE AGREEMENT. All prior negotiations and understandings of the
parties relating to the subject matter hereof are merged herein. This instrument
contains the entire agreement between the parties relating to such subject
matter and supersedes all agreements, written and oral, if any, relating
thereto.
(e) ATTORNEYS' FEES. The prevailing party in any suit brought to
enforce or interpret this Agreement shall be entitled to recover a reasonable
attorneys' fee in addition to any other relief awarded.
(f) SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
(g) NOTICE. Any notice required or permitted to be sent hereunder shall
be effective when actually delivered or when mailed by certified mail, return
receipt requested to the party entitled to receive such notice at the address
set forth on the signatory page hereof. Each party may change its address for
notice by notice to the other party.
(h) GOVERNING LAW, JURISDICTION AND VENUE. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of Texas. In any
dispute or proceeding to enforce or interpret this Agreement, the parties
expressly consent to the exclusive jurisdiction of the state and federal courts
of Dallas County, Texas and venue shall be proper in Dallas County.
(i) NOTICE. Any notice or other instrument served or delivered to
either party under this Agreement shall be deemed given or delivered when
personally delivered or deposited in the United States Mail, registered or
certified, with proper prepaid postage affixed, addressed to such party at the
address set forth below.
SELLER: Regal International, Inc.
P. O. Box 1237
Corsicana, TX 75151
Attn: President
Asset Purchase Agreement Page 6
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<PAGE> 7
COPY TO: Ira F. Levy
Goins, Underkofler, Crawford
& Langdon
3300 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
PURCHASER Harlequin Investment Holdings Limited
& HARLEQUIN Noble House
Queen's Road
St. Peter Port
Guernsey, Channel Islands
DATED the 8th day of February 1996.
SELLER
REGAL INTERNATIONAL, INC.
by: /s/ RICHARD N. GRAY
--------------------------------
PURCHASER
NEW REGAL INTERNATIONAL, INC.
by: /s/ RICHARD N. GRAY
--------------------------------
HARLEQUIN:
HARLEQUIN INVESTMENT HOLDINGS
LIMITED
by: /s/ RICHARD N. GRAY
--------------------------------
Asset Purchase Agreement Page 7
Page 35 of 44
<PAGE> 8
SCHEDULE A
Date:
China Strategic Holdings Limited
52/F Bank of China Tower
One Garden Road
Hong Kong
REPRESENTATION AND COMFORT LETTER
We, Harlequin Investment Holdings Limited ("Harlequin") and New Regal
International, Inc. hereby jointly and severally represent to China Strategic
Holdings Limited that immediately subsequent to the closing of the Asset
Purchase Agreement (a copy of which is attached herewith for identification
purpose), Regal International, Inc. ("Regal") shall have no liability (either
actual or contingent) other than the liabilities created by the transactions
contemplated by the Acquisition Agreement (as attached marked "AA").
In reliance of this representation by Harlequin, you have agreed to enter into
the Stock Purchase Agreement with us.
Yours faithfully,
for and on behalf of
HARLEQUIN INVESTMENT HOLDINGS LIMITED
Authorized Signatory
Asset Purchase Agreement Page 8
Page 36 of 44
<PAGE> 1
EXHIBIT 99-4
CONVERTIBLE PROMISSORY NOTE
PRINCIPAL AMOUNT
US $900,000.00
FOR VALUE RECEIVED, Regal (New) International, Inc., a Texas corporation
(the "MAKER") does hereby promise to pay to the order of Regal International,
Inc., a Delaware corporation (hereinafter "HOLDER"), at the address described by
Holder, the principal amount of Nine Hundred Thousand US Dollars (US $900,000)
with interest (computed on the basis of a 365 day year) on the unpaid principal
balance of such principal amount at the rate of nine percent (9%) per annum from
the date hereof until maturity. Principal and interest shall be due and payable
in sixty (60) equal, monthly installments of $18,682.37 payable on the seventh
day of March 1996 and continuing on the seventh day of each month thereafter
until paid in full.
This Note is secured by a certain Pledge Agreement of even date herewith
granting the Holder a security interest in all the outstanding shares of Regal
(New) International, Inc. registered in the name of the Harlequin Investment
Holdings Limited.
The Maker waives presentment, demand, protest, notice of dishonor and
notice of intent to accelerate.
If any provision of this Note shall be determined to be invalid or
unenforceable under law, such determination shall not affect the validity or
enforcement of the remaining provisions of this Note. This Note is execute under
seal and shall be binding upon the successors and assigns of the Maker.
Upon default, the Maker shall be liable for interest at the rate of 18% per
annum on the unpaid principal balance and accrued and unpaid interest plus all
reasonable costs of collection including, but not limited to, reasonable
attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the State of New York and the United States of America.
The indebtedness represented by this Note is subordinate and inferior to a
certain $1,500,000 Secured Credit Facility by and between Fremont Financial
Corporation and Maker.
The conversion privileges with respect to this Note are attached hereto as
Exhibit A and made a part hereof for all purposes.
EXECUTED the 13th day of February, 1996, but effective as of January 31,
1996.
REGAL (NEW) INTERNATIONAL, INC.
by: /s/ Janak Desai
------------------------------------
Janak Desai President
Page 37 of 44
<PAGE> 2
EXHIBIT A
CONVERSION OF NOTE.
A. Subject to and upon compliance with the provisions hereof, at the option
of the holder thereof, this Note may, during the 30-day period beginning on the
date Holder receives the audited Balance Statement of the Maker as of the
Valuation Date (herein defined) of each year and at the maturity hereof, be
converted at the principal amount thereof and accrued interest thereon into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/1OOth of a share) of Common Stock, $0.10 par value, of the Maker (the
"Common Stock"), at the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion.
B. The conversion price (herein called the "Conversion Price") shall be an
amount per share of Common Stock equal to the Book Value (as herein defined)
divided by the number of shares outstanding on Net Valuation Date. The
Conversion Price shall be subject to adjustment from time to time as herein
provided. The Conversion Price prior to any adjustment and the adjusted
Conversion Price after each adjustment are hereinafter referred to as the actual
Conversion Price.
C. The term "Net Book Value" as used herein shall be an amount equal to the
amount of the Corporation's assets, less the amount of its liabilities, as of
the end of the most recent fiscal year (the "Valuation Date") as disclosed by
the Maker's books of account regularly maintained in accordance with generally
accepted accounting principles consistently applied.
D. In no event shall this Note be convertible into a number of shares of
Common Stock which would result in the Holder owning more than forty-nine
percent (49%) of the total issued and outstanding shares of Common Stock after
the conversion. In such event, the Conversion Price will be automatically
increased so that this Note is convertible into an amount of shares which is
equal to forty-nine percent (49%) of the issued and outstanding shares of Common
Stock after the conversion of this Note.
RESTRICTIONS ON TRANSFER; COMPLIANCE WITH SECURITIES ACT.
A. The holder acknowledges that the securities issued upon conversion of
the Note are characterized as "restricted securities" under the federal
securities laws since they are being acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the Act
only in compliance with certain conditions and under limited circumstances,
including the following:
(i) A registration statement with respect thereto has become effective
under the Act, or
(ii) There is presented to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that registration under the
Act is not necessary; or
Page 38 of 44
<PAGE> 3
(iii) There is presented to the Company a letter from the staff of the
Securities and Exchange Commission to the effect that the staff will not
recommend that said Commission take any action in respect of such offer or
transfer and to the effect that said staff concurs in the opinion that such
registration or compliance is not necessary (provided that the Company
reasonably agrees with the facts stated in such letter insofar as they pertain
to it); or
(iv) There is presented to the Company written evidence that the sale,
pledge or transfer complies with the provisions of Rule 144 as amended under the
Act.
B. It is understood that the certificates evidencing the Common Stock
issuable upon conversion of this Note, when issued, will bear legends
substantially to the following effect:
"THE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION, BUT HAS BEEN ISSUED PURSUANT TO THE PRIVATE
OFFERING EXEMPTION UNDER THE SECURITIES ACT OF 1993, AS AMENDED
(THE "ACT"), AND THE PRIVATE OFFERING EXEMPTION UNDER THE
SECURITIES LAWS OF THE STATES OF DELAWARE AND TEXAS, AND THE
REGISTERED HOLDER OF SUCH SECURITY HAS EXECUTED AN INVESTMENT
REPRESENTATION WITH RESPECT THERETO. ACCORDINGLY, THE SALE,
TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS
SECURITY IS RESTRICTED AND MAY NOT BE ACCOMPLISHED EXCEPT IN
ACCORDANCE WITH THE ACT AND THE APPLICABLE RULES ADOPTED UNDER IT
AND WITH THE PERMISSION OF THE COMPANY UPON THE FURNISHING OF AN
OPINION OF COUNSEL SATISFACTORY TO COUNSEL FOR THE COMPANY THAT
REGISTRATION IS UNNECESSARY FOR SUCH TRANSACTIONS."
C. This Note shall be non-transferable except to a group, company or
affiliate of CSH ceases to be group, company or affiliate of CSH, this Note must
be transferred to CSH or another group or affiliated company.
Page 39 of 44
<PAGE> 1
EXHIBIT 99-5
PROMISSORY NOTE
PRINCIPAL AMOUNT
US $800,000.00
FOR VALUE RECEIVED, Regal (New) International, Inc., a Texas
corporation (the "MAKER") does hereby promise to pay to the order of Regal
International, Inc., a Delaware corporation (hereinafter "HOLDER"), at the
address described by Holder, the amount of Eight Hundred Thousand US Dollars
(US $800,000). This Note shall bear no interest.
The outstanding principal balance of this Note shall be due and payable
in full on February 1, 2001.
This Note is secured by a certain Pledge Agreement of even date
herewith granting the Holder a security interest in all the outstanding shares
of Regal (New) International, Inc. registered in the name of the Harlequin
Investment Holdings Limited.
The Maker waives presentment, demand, protest, notice of dishonor and
notice of intent to accelerate.
If any provision of this Note shall be determined to be invalid or
unenforceable under law, such determination shall not affect the validity or
enforcement of the remaining provisions of this Note. This Note is execute
under seal and shall be binding upon the successors and assigns of the Maker.
Upon default, the Maker shall be liable for interest at the rate of 18%
per annum on the unpaid principal balance and accrued and unpaid interest plus
all reasonable costs of collection including, but not limited to, reasonable
attorneys' fees.
This Note shall be governed by and construed in accordance with the
laws of the State of New York and the United States of America.
The indebtedness represented by this Note is subordinate and inferior
to a certain $1,500,000 Secured Credit Facility by and between Fremont
Financial Corporation and Maker.
EXECUTED this 13th day of February, 1996, but effective as of January
31, 1996.
REGAL (NEW) INTERNATIONAL, INC.
by: /s/ JANAK DESAI
-----------------------------------
Janak Desai President
Page 40 of 44
<PAGE> 1
EXHIBIT 6
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement"), dated February 13, 1996 to be
effective as of January 31, 1996, is made by and between Harlequin Investment
Holdings Limited ("Pledgor") and Regal International, Inc. (the "Secured
Party").
INTRODUCTORY PROVISIONS:
A. Regal (New) International, Inc., a Texas corporation ("New
Regal"), has as of this day executed a promissory note in the principal amount
of $900,000 ("the $900,000 Note") payable to the order of the Secured Party and
a second promissory note in the principal amount of $800,000 ("the $800,000
Note") payable to the order of Secured Party.
B. As a condition to accepting the $900,000 Note and the $800,000
Note, the Secured Party requires that Pledgor pledge to and grant a security
interest in Pledgor's shares of Capital Stock of the New Regal to secure the
payment of the $900,000 Note and $800,000 Note and performance of the New
Regal's obligations to Secured Party.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereto agree as follows:
1. The Pledge and Security Interest. The Pledgor hereby grants to
the Secured Party a security interest in and to any and all present or future
rights of the Pledgor in and to all of the following rights, interests, and
property (all of the following being herein sometimes called the "COLLATERAL);
(a) 100,000 shares of the common stock of New Regal registered in the name of
the Pledgor represented by Stock Certificate No. 001, (b) any and all
substitutes, replacements, accessions, attachments, increases, profits,
revisions, additions thereto, or dividends and coupons thereon; and (c) any and
all proceeds arising from or by virtue of the sale or other disposition of, or
from the collection of, the Collateral described in (a) and (b) preceding.
2. The Indebtedness. This Agreement is being executed and
delivered to secure and the security interest herein granted (the "SECURITY
INTEREST") shall secure full payment and performance by New Regal of all of the
indebtedness and obligations owing to the Secured Party by New Regal pursuant
to the terms of the $900,000 Note and the $800,000 Note, together with any and
all renewals and extensions thereof [all of such debts, indebtedness,
liabilities and duties referred to in this paragraph are hereinafter
collectively referred to collectively as the "Indebtedness"].
- --------------------------------------------------------------------------------
PLEDGE AGREEMENT Page 1
Page 41 of 44
<PAGE> 2
3. NEGATIVE COVENANTS OF THE PLEDGOR. The Pledgor further covenants and
agrees that, without the prior written consent of the Secured Party, the Pledgor
will not (a) sell, assign or transfer any of the Pledgor's rights in the
Collateral; or (b) create any other security interest in, mortgage or otherwise
encumber the Collateral, or any part thereof, or permit the same to be or become
subject to any lien, attachment, execution, sequestration, other legal or
equitable process or any encumbrance of any kind or character, except the
Security Interests herein created; or (c) take any action, or allow the
Corporation to take any action, which would dilute the equity percentage of the
Shares without the prior written consent of Secured Party.
4. DEFAULT. As used herein, the term "Default" means the occurrence of one
or more of the following: (a) the failure to timely pay or perform any
obligations or covenants of the Indebtedness as and when due and payable or
performable; (b) the sale, loss, theft, destruction, encumbrance or transfer of
any of the Collateral in violation hereof, or substantial damage to any of the
Collateral; (c) the levy on, seizure or attachment of the Collateral, or any
part thereof.
5. REMEDIES. Upon the occurrence of an event of Default, in addition to any
and all other rights and remedies which the Secured Party may then have
hereunder, under the Uniform Commercial Code of the State of New York or of any
other pertinent jurisdiction (the "Code"), or otherwise, the Secured Party may,
at its option (a) reduce its claim to judgment or foreclose or otherwise enforce
the Security Interest, in whole or in part, by any available judicial procedure;
(b) after notification, if any, provided for herein, sell, lease, or otherwise
dispose of, at the office of the Secured Party, on the premises of the Pledgor,
or elsewhere, all or any part of the Collateral, in its then condition or
following any commercially reasonable preparation or processing, and any such
sale or other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust the Secured Party's power of
sale, but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Indebtedness has been paid and performed
in full), and at any such sale it shall not be necessary to exhibit any of the
Collateral; (c) at its discretion, retain the Collateral in satisfaction of the
Indebtedness whenever the circumstances are such that the Secured Party is
entitled to do so under the Code or otherwise; (d) exercise any and all other
rights, remedies, and privileges it may have under any document which secures
the Indebtedness; and (e) take any other action allowed under applicable law.
Any and all proceeds ever received by the Secured Party from any sale or
other disposition of the Collateral, or any part thereof, or the exercise of any
other remedy pursuant here to shall be applied by the Secured Party to the
Indebtedness in such order and manner as the Secured Party, in its sole
discretion, may deem appropriate, notwithstanding any directions or instructions
to the contrary by the Pledgor.
PLEDGE AGREEMENT Page 2
Page 42 of 44
<PAGE> 3
With respect to any part of the Collateral which is stock certificates,
bonds, or other securities, the Secured Party shall have authority, upon the
occurrence of an event of Default, without notice to the Pledgor, either to have
them registered in the Secured Party's name, or in the name of a nominee, and,
with or without such registration, to demand of the entity issuing the same, and
to receive and receipt for, any and all dividends and other distributions
payable in respect thereof, regardless of the medium in which paid and whether
they be ordinary or extraordinary. Any entity making payment to the Secured
Party hereunder shall be fully protected in relying upon the written statement
of the Secured Party that the Secured Party then holds the Security Interests
which entitles it to receive such payment, and the receipt of the Secured Party
for such payment shall be full acquittance therefor to the person making such
payment.
6. RIGHTS CUMULATIVE. All rights and remedies of the Secured Party
hereunder are cumulative of each other and of every other right or remedy which
the Secured Party may otherwise have at law or in equity or under any other
contract or other writing for the enforcement of the Security Interests herein
or in the collection of the Note or the Indebtedness, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
7. POWER OF ATTORNEY. The Secured Party is hereby appointed the
attorney-in-fact of the Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments which the
Secured Party may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest.
8. NO WAIVERS. No failure on the part of the Secured Party to exercise, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Secured Party of
any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
9. BINDING EFFECT. This Agreement shall be binding on the Pledgor and the
Pledgor's heirs and assigns and shall inure to the benefit of the Secured Party,
and the Secured Party's successors and assigns.
10. TERMINATION. This Agreement and the Security Interests in the
Collateral will terminate when the Indebtedness secured hereby has been paid in
full by extinguishment thereof but not by renewal, modification or extension
thereof.
11. GOVERNING LAW. THE LAW GOVERNING THIS AGREEMENT WILL BE THAT OF THE
STATE OF NEW YORK IN FORCE ON THE DATE OF EXECUTION OF THIS AGREEMENT.
PLEDGE AGREEMENT Page 3
Page 43 of 44
<PAGE> 4
12. AGREEMENT AS FINANCING STATEMENT. The Secured Party shall have the
right at any time to execute and file this Agreement as a financing statement,
but the failure of the Secured Party to do so shall not impair the validity or
enforceability of this Agreement.
PLEDGOR:
HARLEQUIN INVESTMENT
HOLDINGS, LTD.
by: /s/ Richard N. Gray
------------------------------------
Richard N. Gray
Director
PLEDGE AGREEMENT Page 4
Page 44 of 44
