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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______)*
Regal International, Inc.
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(Name of Issuer)
Common Stock, Par Value $.01 Per Share
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(Title of Class of Securities)
758819-10-6
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(CUSIP Number)
Ira F. Levy
Goins, Underkofler, Crawford & Langdon
1601 Elm Street, #3300, Dallas, TX 75201 (214) 969-5454
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
February 19, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /xx/. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
EXHIBIT INDEX IS LOCATED ON PAGE 7 OF 32
Page 1 of 32
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SCHEDULE 13D
CUSIP NO. 758819-10-6 PAGE 2 OF 32 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
China Strategic Holdings Limited
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
Category of Source = 00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Hong Kong
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NUMBER OF 7 SOLE VOTING POWER
SHARES 447,019,868 shares
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY not applicable
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 447,019,868 shares
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PERSON 10 SHARED DISPOSITIVE POWER
WITH not applicable
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
447,019,868 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84% of aggregate shares outstanding after conversion of Convertible Note.
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2 of 7
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SCHEDULE 13D
CUSIP NO. 758819-10-6
REGAL INTERNATIONAL, INC.
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, par value $.01 per share
("COMMON STOCK") of Regal International, Inc. ("REGAL"). Regal's principal
executive offices are located at Highway 31 East, P. O. Box 1237, Corsicana,
Texas 75151.
ITEM 2. INDEMNITY AND BACKGROUND
(a) Name:
China Strategic Holdings Limited
(b) Principal Business:
Investment Holding Company
(c) Address of Principal Office:
52/F Bank of China Tower
1 Garden Road
Hong Kong
(d) During the last five (5) years, neither China Strategic Holdings
Limited ("CSH") nor any of its directors or officers have been convicted in a
criminal proceeding.
(e) During the last five (5) years, neither CSH nor any of its directors
or officers was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and, as a result of such proceeding, was or is
subject to judgment, decree or final order enjoining future violations of a
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Page 3 of 32
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
CSH is the holder of a $13.5 million Convertible Note, the principal of
which is convertible into 447,019,868 shares of Common Stock (the "CONVERTIBLE
NOTE"). CSH acquired the Convertible Note in exchange for its transfer to Regal
of all the outstanding shares of capital stock of Acewin Profits Limited
("ACEWIN"). Acewin is the owner of a fifty-four percent (54%) interest in Wuxi
CSI Vibration Isolator Co., Ltd. ("WUXI"). CSH and Acewin established Wuxi in
1993, together with Wuxi Vibration Isolator Co. to purchase the business and
factory of a manufacturer of various rubber-metal isolators (shock absorbers),
metal bellow and dampening material in mainland China.
ITEM 4. PURPOSE OF TRANSACTION
The acquisition of the Convertible Note was the result of a commercial
transaction. If CSH elects to convert the Convertible Note into shares of Common
Stock in the future, the shares will be acquired for investment purposes and
with a view to acquiring effective control of Regal. It is the desire and
intentions of CSH that Wuxi's business will expand, thereby increasing the value
of the Regal Common Stock. CSH also intends to assist Regal in its attempt to
list the shares of Common Stock for trading on a national exchange and to
improve its image in the investment community.
CSH has entered into preliminary negotiations with Harlequin Investment
Holdings Limited ("HARLEQUIN") to acquire a significant portion of Harlequin at
the same price as the conversion price of the Convertible Note. No definitive
agreement has been executed between CSH and Harlequin as of the date hereof.
Harlequin currently owns 44,952,082 shares of Common Stock (54.9% of the
currently outstanding shares).
ITEM 5. INTEREST IN SECURITIES OF ISSUER
a) CSH is the beneficial owner of 447,019,868 shares of Common Stock,
having the right to acquire such shares upon the conversion of the Convertible
Note. Such shares of Common Stock would represent 84.5% of the total shares of
Common Stock outstanding after such conversion. The percentage set forth in this
Item 5 is based upon a total of 81,806,198 shares outstanding at January 1, 1996
and the addition of 447,019,868 shares upon conversion of the Convertible Note.
b) CSH has the power to dispose of the Convertible Note and will have
the power to dispose and vote the shares of Common Stock received upon
conversion of the Convertible Note.
c) Within the past sixty (60) days, CSH has not disposed of any shares
of Common Stock.
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d) Not applicable.
e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
On February 1995, Harlequin borrowed $200,000 from CSH (the "200,000
LOAN") and secured such loan with the pledge of a certain Promissory Note from
Regal to Harlequin in the original principal amount of $1,002,604 (the
"HARLEQUIN NOTE"). The Harlequin Note was subsequently converted into 20,052,082
shares of Regal Common Stock and such shares were substituted as collateral for
the $200,000 Note. This Loan remains outstanding and unpaid as of the date
hereof.
On February 8, 1996, CSH loaned Harlequin the sum of $800,000 (the
"$800,000 LOAN"). The $800,000 Loan is secured by the pledge by Harlequin of
26,500,000 shares of Regal Common Stock. Under the terms of the $800,000 Loan,
all principal and interest will be due on April 6,1996.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following documents are attached hereto and incorporated herein by
reference:
Exhibit 24 Power of Attorney
Exhibit 99-1 Acquisition Agreement, dated as of February 28,1996 by and
between Regal and CSH.
Exhibit 99-2 9% Convertible Promissory Note, dated as of February 13,1996,
in the original principal amount of $13,500,000, executed by
Regal and payable to the order of CSH.
Exhibit 99-3 Pledge Agreement, dated as of February 13,1996, executed by
Regal to secure payment of the Convertible Note.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: March 5, 1996.
CHINA STRATEGIC HOLDINGS LIMITED
by: /s/ Ira F. Levy
---------------------------------
Ira F. Levy, Attorney-in-Fact
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EXHIBIT INDEX
Exhibit 24 Power of Attorney
Exhibit 99-1 Acquisition Agreement, dated as of February 28,1996 by and
between Regal and CSH.
Exhibit 99-2 9% Convertible Promissory Note, dated as of February 13, 1996,
in the original principal amount of $13,500,000, executed by
Regal and payable to the order of CSH.
Exhibit 99-3 Pledge Agreement, dated as of February 13,1996, executed by
Regal to secure payment of the Convertible 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
and Regal International, Inc. on behalf of the undersigned (i) the Statement on
Schedule 13D and any amendments thereto, and (ii) the Form 3, Initial Statement
of Beneficial Ownership of Securities. Such authorization and designation shall
expire on December 31, 1997.
DATED: February 4, 1996.
CHINA STRATEGIC HOLDINGS, LIMITED
BY: /s/ CATHERINE MA
--------------------------------------
Authorized Signature(s)
TITLE: Executive Director & Secretary
-----------------------------------
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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-
Page 14 of 32
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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
Page 16 of 32
<PAGE> 9
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
Page 17 of 32
<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
Page 18 of 32
<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:
------------------------------
Page 19 of 32
<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.
Page 20 of 32
<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
Page 21 of 32
<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 Noteholder 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)."
Page 22 of 32
<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 LIMITED
Page 23 of 32
<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 32
<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 32
<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 32
<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.
Page 27 of 32
<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
Page 28 of 32
<PAGE> 1
EXHIBIT 99-4
PLEDGE AGREEMENT
This Pledge Agreement (the "AGREEMENT") dated of February 13, 1996 is
made by and between Regal International, Inc. ("PLEDGOR") and China Strategic
Holdings Limited (the "SECURED PARTY").
INTRODUCTORY PROVISIONS:
A. Pledgor has as of this day executed a 9% Secured Convertible
Promissory Note in the principal amount of US $13,500,000 ("THE NOTE") payable
to the order of the Secured Party in consideration for the purchase of all the
outstanding capital stock of Acewin Profits Limited (the "SHARES").
B. As a condition to accepting the Note, the Secured Party requires that
Pledgor pledge to and grant a security interest in the Shares to secure the
payment of the Note.
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) all
the issued and outstanding shares of the capital stock of Acewin Profits Limited
registered in the name of the Pledgor (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 Regal of all of the indebtedness and
obligations owing to the Secured Party by Regal pursuant to the terms of the
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"].
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
Page 29 of 32
<PAGE> 2
(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.
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
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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.
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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:
REGAL INTERNATIONAL, INC.
by: /s/ Janak Desai
---------------------------------
Janak Desai, President
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