<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
China Pacific, Inc.
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(Name of Issuer)
Common Stock, par value $0.001
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(Title of Class of Securities)
169404209
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(CUSIP Number)
China Pacific, Inc., Chengdu Iron and Steel Plant Office Building, Qingbaijiang
District, Chengdu, Sichuan Province, China, Post Code 610303
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86-28-330-6590
with a copy to
Matthew A. Anderson, Esq., Heller Ehrman White & McAuliffe, 333 Bush Street, San
Francisco, California 94104
Telephone: (415) 772-6088
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
September 14, 1998
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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 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
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* 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).
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SCHEDULE 13D
CUSIP No. 169404209 PAGE 2 OF 10 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Great China Industries Limited
None
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2 CHECK THE APPROPRIATE BOX, IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00- Loan from Chengdu Row International Limited
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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
British Virgin Islands
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7 SOLE VOTING POWER
3,271,429
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY None
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,271,429
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,271,429
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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)
36.19
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14 TYPE OF REPORTING PERSON*
Corporation
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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.
<PAGE> 3
SCHEDULE 13D
CUSIP No. 169404209 PAGE 3 OF 10 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Thomas Tong Long Tin
None
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2 CHECK THE APPROPRIATE BOX, IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00- Loan to Great China Industries Limited, a corporation owned by Mr.
Tong, from a third party.
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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
Chinese
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7 SOLE VOTING POWER
3,271,429
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY None
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,271,429
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,271,429
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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)
36.19
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14 TYPE OF REPORTING PERSON*
Individual
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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.
<PAGE> 4
CUSIP NO. 169404209 13D PAGE 4 OF 10 PAGES
INTRODUCTION
This Schedule 13D is being filed by Great China Industries Limited, a British
Virgin Islands corporation, and by Mr. Thomas Tong Long Tin ("Thomas Tong"), the
sole beneficial owner of Great China Industries Limited. Each of Mr. Thomas Tong
and Great China Industries Limited is identified in Item 2 below as a Reporting
Person. Great China Industries Limited is the direct beneficial owner of the
subject issuer's common stock, pursuant to the transaction described below in
items 3 and 5(c), while Mr. Thomas Tong is the indirect owner of such common
stock.
ITEM 1. SECURITY AND ISSUER
Common Stock, par value $0.001
China Pacific, Inc.
Chengdu Iron and Steel Plant Office Building
Qingbaijiang District, Chengdu, Sichuan Province
China, Post Code 610303
ITEM 2. IDENTITY AND BACKGROUND
Reporting Person 1 - Great China Industries Limited
(a) Name; Great China Industries Limited
State or other Place of Organization; British Virgin Islands
Primary Business; Investment Holdings
Address of Principal Office; 17C, Unionway Commercial Centre, 283
Queen's Road Central, Hong Kong.
A description of the names, business addresses, principal
occupations and citizenship of the directors and executive
officers of Great China Industries Limited is set forth on
Schedule 1 to this Schedule 13D.
(d) and (e) Provide details of any criminal convictions or civil
proceedings, if none so state; During the last five years none of
the Reporting Persons, nor any of their individual directors or
executive officers, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), nor have
any of such persons been party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or
prohibiting
<PAGE> 5
CUSIP NO. 169404209 13D PAGE 5 OF 10 PAGES
or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.
(f) Citizenship; Not applicable
Reporting Person 2 - Mr. Thomas Tong
(a) Name; Tong Long Tin, Thomas
(b) Residence Address; Flat C, 12/F, Block 5, Hanford Garden, 333
Castle Peak Bay, NT, Hong Kong.
(c) Present principal occupation or employment and name,
principal business and address of any corporation or other
organization in which such employment is conducted; Mr. Tong is
the Acting President, Chief Financial Officer and a director of
China Pacific, Inc., a Nevada corporation (the "Company") that is
engaged, through a majority-owned joint venture subsidiary, in
iron and steel production in Chengdu, Sichuan province, China.
The address of China Pacific, Inc. is the same as the address in
Item 1 above.
(d) Provide details of any criminal convictions, if none, so
state; None
(e) Provide details of any civil proceedings, if none, so state;
None
(f) Citizenship; Chinese
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Great China Industries Limited has agreed to purchase 3,271,429 shares
of the common stock, par value $0.001 (the "Common Stock") of China
Pacific, Inc., a Nevada corporation, for US$0.2761 per share, or a total
of US$903,225.81 (the "Purchase Price"). The Purchase Price is to be
paid with HK$700,000 (equivalent to US$90,332.58) in cash, which was
delivered on the Closing Date of the transaction, September 21, 1998,
with the remainder to be paid in a lump sum of HK$6,300,000 (equivalent
to US$812,893.23) which is to be delivered one month after the Closing
Date. The source of these funds is an unsecured loan to Great China
Industries Limited from Chengdu Row International Limited, a British
Virgin Islands corporation. The loan is a 2 year term loan with interest
of 8 percent per annum, repayable at the maturity of the loan.
Mr. Thomas Tong, the sole shareholder of Great China Industries Limited,
has agreed pursuant to the Stock Purchase Agreement described in Item 6
below to serve as a guarantor of Great China Industries Limited's
obligation to pay the Purchase Price.
<PAGE> 6
CUSIP NO. 169404209 13D PAGE 6 OF 10 PAGES
ITEM 4. PURPOSE OF TRANSACTION
The purpose of the purchase of the Company's Common Stock by Great China
Industries Limited ("the Buyer") is long term investment. The Reporting
Persons intend for the Company to proceed with the 1-for-5 reverse stock
split that will be effective September 28, 1998. In addition, the
Company may investigate disposing of certain of its assets that have
negative value or equity.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
(a) Great China Industries Limited directly beneficially owns
3,271,429 shares of Common Stock, 36.19 percent of the class, while Mr.
Thomas Tong indirectly beneficially owns the same number of shares
through his sole ownership of Great China Industries Limited.
(b) Great China Industries Limited and Mr. Thomas Tong each have
sole voting and dispositive power over the 3,271,429 shares of Common
Stock.
(c) Great China Industries, Limited, a British Virgin Islands
corporation (the "Buyer"), purchased 3,271,429 shares of the Common
Stock of China Pacific, Inc. on September 14, 1998, for the Purchase
Price (as defined in Item 3 above), from C.P. Investment Limited, a
British Virgin Islands corporation (the "Seller"). Mr. Thomas Tong
serves as a guarantor (the "Buyer Guarantor") for the Buyer's obligation
to pay the Purchase Price. The transaction was effected in Hong Kong.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
On September 14, 1998, Buyer, Seller, and Buyer Guarantor entered
into a Common Stock Purchase Agreement (the "Common Stock Purchase
Agreement"), whereby Buyer agreed to purchase 3,271,429 shares of the
Common Stock of China Pacific, Inc. from Seller, in exchange for the
Purchase Price. Buyer Guarantor agreed, pursuant to the terms of the
Common Stock Purchase Agreement, to guarantee Buyer's obligation to pay
the Purchase Price to the Seller. The payment terms for the Purchase
Price are as described above in Item 3.
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CUSIP NO. 169404209 13D PAGE 7 OF 10 PAGES
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 7(1). Common Stock Purchase Agreement dated September 14,
1998 by and among Great China Industries Limited, Thomas Tong Long Tin
as Buyer Guarantor and C.P. Investment Ltd.
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CUSIP NO. 169404209 13D PAGE 8 OF 10 PAGES
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 23, 1998 /s/ Thomas Tong Long Tin
------------------------------------
Signature
Name: Thomas Tong Long Tin
GREAT CHINA INDUSTRIES LIMITED
By: /s/ Thomas Tong Long Tin
---------------------------------
Thomas Tong Long Tin
Title: President
<PAGE> 9
CUSIP NO. 169404209 13D PAGE 9 OF 10 PAGES
SCHEDULE 1
GREAT CHINA INDUSTRIES LIMITED
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name and Business Address Title Citizenship Present Principal
- ------------------------- ----- ----------- Occupation or Employment
------------------------
<S> <C> <C> <C>
Thomas Tong Long Tin President and Chinese Acting President, Chief
Flat C, 12/F, Block 5, Director Financial Officer and Director
Hanford Garden of China Pacific, Inc.
333 Castle Peak Bay
NT, Hong Kong
</TABLE>
<PAGE> 10
CUSIP NO. 169404209 13D PAGE 10 OF 10 PAGES
Exhibit List
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
7(1) Common Stock Purchase Agreement dated September 14, 1998 by and
among Great China Industries Limited, Thomas Tong Long Tin as
Buyer Guarantor and C.P. Investment Ltd.
</TABLE>
<PAGE> 1
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COMMON STOCK PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 14, 1998
BY AND AMONG
GREAT CHINA INDUSTRIES LIMITED
THOMAS TONG LONG TIN AS BUYER GUARANTOR
AND
C. P. INVESTMENT LTD.
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<PAGE> 2
STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT ("Agreement") is entered
into as of this 14th day of September, 1998 by and among GREAT CHINA INDUSTRIES
LIMITED, a British Virgin Islands corporation with an address at P.O. Box 957,
Offshore Incorporations Centre, Tortola, British Virgin Islands ("Buyer"),
THOMAS TONG LONG TIN as guarantor of Buyer's obligations ("Buyer Guarantor"),
with an address at 17C Unionway Commercial Centre, 283 Queen's Road Central,
Hong Kong and C. P. INVESTMENT LTD., a British Virgin Islands corporation
("Seller"), with an address at Skelton building, Main Street, P.O. Box 3136,
Road Town, Tortola, British Virgin Islands.
I.
BACKGROUND
1. As of the date hereof, Seller owns 3,271,429 shares of common stock
of China Pacific, Inc. (the "Company"), US$0.001 par value per share.
2. Pursuant to this Agreement, Buyer shall purchase an aggregate of
3,271,429 shares of common stock of the Company from Seller.
ACCORDINGLY, BUYER AND SELLER AGREE AS FOLLOWS;
II.
DEFINITIONS
A. Certain Defined Terms.
The following terms used in this Agreement have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, controls, or is under common control with, or is controlled by,
such Person, and includes any Person that would be deemed to be an "affiliate"
or an "associate" of such Person, as those terms are defined in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
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<PAGE> 3
"Buyer Shares" means the 3,271,429 shares of Common Stock
purchased by Buyer pursuant to this Agreement.
"Charter Documents" of a Person means the articles or certificate
of incorporation, the by-laws and any other charter documents of such Person.
"Closing Date" means the date on which (i) each of the conditions
to the purchase and sale of Common stock hereunder has been satisfied in full,
and (ii) the actions described in Sections (V) (C) and (V) (D) of this Agreement
have been taken.
"Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Act.
"Common Stock" means the company's Common Stock existing as of
the date hereof or hereafter.
"Deferred Payment" means the amount of deferred payment specified
in Section (III) (A) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
"Holder" means any registered holder of Buyer Shares.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts and other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Stock Outstanding" means the aggregate number of shares of
Common Stock outstanding from time to time.
"Subsidiary" of any Person means a corporation of which more than
fifty percent (50%) of the outstanding shares of capital stock of each class
having ordinary voting power as owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries.
-2-
<PAGE> 4
III.
STOCK PURCHASE
A. Agreement to Sell and Purchase Common Stock. Seller agrees to sell,
and Buyer agrees to purchase, on the Closing Date, 3,271,429 shares of Common
Stock, which represents in the aggregate 36.2% of the Stock Outstanding as of
the date hereof. The aggregate purchase price of such Common Stock shall be
HK$7,000,000 (equivalent to US$903,225.81 at the rate of US$l=HK$7.75)
(US$0.2761 per share) and Buyer shall pay HK$700,000 (equivalent to US$90,322.58
at the rate of US$l=HK$7.75) (10%) to Seller in cash on the Closing Date and the
remainder in a single installment of HK$6,300,000 (equivalent to US$812,903.23
at the rate of US$1=HK$7.75) payable to Seller within one month after the
Closing Date, hereinafter referred to as the "Deferred Payment"
B. Transfer of Stock Certificate. On the Closing Date, in consideration
of the payment and the Deferred Payment as provided in Section (III) (A), Seller
will deliver to Buyer share certificates for 3,271,429 shares of Common Stock,
duly endorsed and a duly executed instrument of stock transfer in respect of the
Buyer Shares, if requested by Buyer.
C. Payment of Expenses and Taxes. Seller and Buyer shall each pay 50% of
any documentary stamp taxes attributable to the sale of Buyer Shares. Save as
aforesaid, all the expenses and taxes imposed by law or any government agency
shall be borne by Buyer.
IV.
REPRESENTATIONS AND WARRANTIES
A. By Seller. Seller represents and warrants to Buyer that, save as
disclosed or already known to Buyer as of the date hereof:
1. Legal Status; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. The Company and each of its Subsidiaries are duly qualified or licensed
to do business and are in good standing in all jurisdictions in which the
failure to obtain such qualification or licensing could reasonably be expected
to have a material adverse effect on the business or financial condition of the
Company. The Company has all requisite corporate power and authority to conduct
business, and to own, lease, sell or otherwise dispose of property.
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<PAGE> 5
2. Capitalization. As of the date hereof, the authorized
capitalization and all outstanding shares of capital stock of the Company is
US$3,073,479 and 9,039,644 respectively.
3. Valid Issue. All Buyer Shares are duly authorized and validly
issued, fully paid and nonassessable and free from any tax, lien, charge or
security interest (other than liens and security interests created by Buyer).
4. No Conflicts. Neither the execution and delivery nor the
performance of this Agreement and any other instruments or documents executed
and delivered pursuant hereto (i) conflicts with the Charter Documents of the
Company, (ii) violates any material law, regulation or ordinance, or any order
or ruling of any court or governmental entity, applicable to the Company, or
(iii) results in a breach or violation of, or constitutes a default under, any
term of any agreement or instrument to which the Company is a party or by which
it or any of its properties or assets are bound, which could reasonably be
expected to have a material adverse effect on the Company's business,
properties, conditions (financial and otherwise) or operations.
5. Binding and Enforceable. This Agreement has been duly executed and
delivered by Seller and is a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject, as to
enforcement, (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other laws of general applicability relating to or affecting
creditors' rights, and (ii) to general principles of equity, whether such
enforcement is considered in a proceeding at law or in equity.
6. Truth and Accuracy of Information. None of the documents,
instruments and other information furnished to Buyer by Seller contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make any statements made therein not misleading. No
representation, warranty or statement made by Seller herein or in any other
document, certificate, exhibit or schedule contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make any statements made therein not misleading. There is no fact
which materially and adversely affects the condition (financial or otherwise),
results of operations, business, properties or prospects of the Company or any
of its Subsidiaries which has not been disclosed in the documents provided to
Buyer.
7. Financial Statements. Seller has furnished Buyer with copies of
the Company's current unaudited and audited consolidated balance sheets and
statements of income and cash flow for the period ended June 30, 1998 and the
fiscal year ended 1997. Each of the foregoing financial statements (the
"Financial Statements") is accurate and
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<PAGE> 6
complete in all material respects, is consistent with the Company's and each of
its Subsidiaries' books and records (which, in turn, are accurate and complete
in all material respects), present fairly the Company's and each of its
Subsidiaries' financial condition and results of operations as of the times and
for the periods referred to therein, and has been prepared in accordance with
U.S. generally accepted accounting principles, subject in the case of unaudited
financial statements to changes resulting from normal year-end adjustments for
recurring accruals (which shall not be material individually or in the
aggregate) and to the absence of footnote disclosure.
8. Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known, whether due or to
become due and regardless of when asserted) arising out of transactions entered
into at or prior to the date to which the Financial Statements are made up, or
any action or inaction at or prior to the date to which the Financial Statements
are made up, or any state of facts existing at or prior to the date to which the
Financial Statements are made up which has not been disclosed in the Company's
Financial Statements.
9. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority is required to be obtained by Seller in connection with its
execution, delivery and performance of this Agreement or the consummation of any
other transaction contemplated hereby other than the filing of certain forms by
Buyer, Seller and/or the Company with the Commission.
10. No Commissions or Fees. No investment banker, broker-dealer or
finder has received or is entitled to receive a commission or fee from Seller
or, to Seller's knowledge, from any third party in connection with Seller's sale
of the Buyer Shares or Seller's execution of this Agreement.
B. Representations of Buyer.
Buyer represents, warrants and acknowledges to Seller as follows:
1. Purchase for Investment. Buyer is acquiring the Buyer Shares for
investment for Buyer's own account, not as a nominee or agent, and not with a
view to or for sale or distribution thereof in violation of the Securities Act
or other securities laws. Buyer has not been contacted concerning the
acquisition of Buyer Shares by means of any general solicitation or
advertisement.
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<PAGE> 7
2. Sophistication. Buyer has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of Buyer's investment in Buyer Shares; Buyer is able to bear the economic
risks of such investment; Buyer has the capacity to protect its own interests in
connection with the transactions contemplated by this Agreement; and Buyer has
had an opportunity to ask questions of Seller and of other management of the
Company and to obtain such financial and other information from Seller and from
the Company as Buyer deems necessary or appropriate in connection with
evaluating the merits of the investment in Buyer Shares; provided, however, that
none of Buyer's representations under this Section (IV) (B) is intended in any
way to limit the scope or applicability of Seller's representations and
warranties in this Agreement, the truth, accuracy and completeness of which
Buyer has relied upon in deciding to invest in Buyer Shares. Buyer acknowledges
that Buyer Shares have not been and will not be registered under the Act or any
other securities laws and may not be transferred except in compliance with all
applicable securities laws. Save as specifically warranted or represented by
Seller under this Agreement, Buyer has not relied on any other representation or
warranty of Seller. No investment banker, broker-dealer or finder has received
or is entitled to receive a commission or fee from Buyer or, to Buyer's
knowledge, from any third party in connection with Buyer's purchase of the Buyer
Shares or Buyer's execution of this Agreement.
V.
COVENANTS AND CONDITIONS PRIOR TO CLOSING
A. Affirmative Covenants of Seller. Prior to the Closing, unless Buyer
otherwise agrees in writing, Seller shall cause the Company and each of its
Subsidiaries to perform the following:
(a) Conduct the Company's and each of its Subsidiaries' business and
operations only in the ordinary course of business;
(b) Keep in full force and effect the Company's and each of its
Subsidiaries' corporate existence and all rights, franchises and intellectual
property relating or pertaining to its business;
(c) Carry on the business of the Company and each of its Subsidiaries
in the same manner as presently conducted and keep the Company's and each of its
Subsidiaries' business organization and properties intact;
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<PAGE> 8
(d) Maintain the assets of the Company and each of its Subsidiaries
in good repair, order and condition consistent with current needs;
(e) Maintain the books, accounts and records of the Company and each
of its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements; and
(f) Comply with all legal requirements and contractual obligations
applicable to the operations and business of the Company and each of its
Subsidiaries and pay all applicable taxes.
B. Negative Covenants of Seller. Save in the ordinary course of business
of the Company or its Subsidiaries, or as required by any laws or regulations,
Seller shall cause the Company and each of its Subsidiaries not to do the
following:
(a) Directly or indirectly, solicit, encourage or initiate any
discussion with, or negotiate or otherwise deal with, or provide any information
to, any Person other than Buyer and Buyer's legal representatives concerning any
disposition or sale of, or enter into any agreement concerning any sale,
transfer, assignment or other disposition of, any assets of the Company and each
of its Subsidiaries;
(b) Make any loans, enter into any transaction with any insider or
make or grant any increase in any employee's or officer's compensation or make
or grant any increase in any employee benefit plan, incentive arrangement or
other benefit covering any of the employees of the Company and each of its
Subsidiaries;
(c) Establish or, except in accordance with past practice, contribute
to any pension, retirement, profit sharing or stock bonus plan covering the
employees of the Company and each of its Subsidiaries;
(d) Except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the ordinary course of the
Company's business and at arm's length with unaffiliated Person; or
(e) Fail to take or commit to take any action which failure could
reasonably be anticipated to have a material adverse effect upon the business,
assets, operations, financial condition, operating results, earnings, employee
and sales representative relations or business prospects of the Company or any
of its Subsidiaries.
-7-
<PAGE> 9
C. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of or before the Closing Date:
(a) The representations and warranties set forth in section (IV) (A)
shall be true and correct in all material respects at and as of the Closing
Date;
(b) Seller shall have performed and complied with, and shall cause
the Company and each of its Subsidiaries to perform and comply, in all material
respects with all of the covenants and agreements required to be performed by
them under this Agreement on or prior to the Closing Date;
(c) All consents by third parties that are required to be obtained by
Seller for the transfer of Buyer Shares to Buyer or that are required for the
consummation by Seller of the transactions contemplated hereby, or that are
required in order to prevent a breach of or a default under or a termination or
modification of any contract, agreement, instrument or lease to which the
Company and each of its Subsidiaries is a party or to which any portion of the
property of the Company and each of its Subsidiaries is a party or to which any
portion of the property of the Company and each of its Subsidiaries is subject
shall have been obtained;
(d) All governmental filings, authorization and approvals that are
required to be made by Seller and by the Company for the sale of Buyer Shares
and the consummation by Seller of the transactions contemplated hereby
(including without limitation filings with the Commission by Seller and the
Company) shall have been duly made and obtained;
(e) There is no unfavorable judgment, decree, injunction or order
against Seller or the Company which would prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions to be
rescinded;
(f) There has been no material adverse change to the financial
condition of the Company;
(g) Buyer shall be satisfied with the result of its legal,
accounting, business, and other due diligence investigation and review of the
Company and each of its Subsidiaries;
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(h) On or prior to the Closing Date, Seller shall have delivered to
Buyer certified copies of the resolution of Seller's board of directors
approving the transactions contemplated by this Agreement; and
(i) All proceedings to be taken by the Company, any of its
Subsidiaries and Seller in connection with the consummation of this transaction
shall be taken (e.g., Buyer and Seller hereby agree that all representatives of
Seller at the board of directors of the Company shall resign as of the Closing
Date at the request of Buyer and Buyer shall have the right to nominate a
similar number of Buyer's representatives to the board of directors of the
Company and its Subsidiaries). In addition, Seller shall assist Buyer so that
the relevant bank signatories of the Company shall be changed to those of the
representatives of Buyer as of the Closing Date.
D. Conditions to Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of or before the Closing Date:
(a) Receipt by Seller of HK$700,000 (equivalent to US$90,322.58) on
the Closing Date; and
(b) All governmental filings, authorization and approvals that are
required for the purchase of Buyer Shares and the consummation of the
transactions contemplated hereby (including without limitation filings with the
Commission by Buyer) shall have been duly made and obtained on terms
satisfactory to Seller in its sole discretion.
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VI.
MISCELLANEOUS
A. Transfers.
1. Transfers. Buyer may not make a transfer of Buyer Shares unless
such transfer is made in compliance with any applicable securities laws and
Buyer shall have fully paid Seller the Deferred Payment prior to any such
transfer. The Company shall cooperate with any such transfer. Upon any transfer,
the transferee shall make to the Company the representations and warranties made
by Buyer in Section (IV) (B).
2. Mechanics of Transfer. The Company shall register any transfer of
record ownership of any outstanding stock certificate evidencing Buyer Shares as
permitted by this Section (VI) on the Company's transfer records upon surrender
at the office of the Company of such certificate duly endorsed for transfer or
accompanied by an appropriate form of assignment separate from such certificate
duly executed by the Holder or by a duly-authorized attorney-in-fact. Upon
registration of transfer, the Company shall issue a new stock certificate
representing the relevant Buyer Shares to the transferee (and to the transferor
as to any portion not transferred) and shall cancel the surrendered stock
certificate representing Buyer Shares.
3. Further Assurance. The Company shall, from time to time at the
request of any Holder, execute and deliver to such Holder or to such Person or
Persons as such Holder may designate, all further instruments as may in such
Holder's opinion be reasonably necessary or advisable to give full force and
effect to any transfer.
4. Information. In connection with any transfer, any Holder may
disclose all documents and information which such Holder now has or may
hereafter acquire relating to Buyer Shares, this Agreement, the Company or any
of its Subsidiaries or the business of the Company or any of its Subsidiaries,
provided that the party to whom the Holder discloses such information agrees to
keep all nonpublic information regarding the Company, its business or its
subsidiaries' business confidential, subject to customary limitations on such
obligations, including the right to disclose such information to such Person's,
officers, directors, employees, agents, consultants and attorneys, to disclose
such information as required to be disclosed by law or to disclose such
information as requested by regulatory authorities.
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B. Indemnification. (a) Seller indemnifies Buyer, and hold it harmless
from and against any loss, liability, deficiency, damage or expense (including,
without limitation, reasonable legal expenses and costs and including interest)
(a "Loss") which Buyer may suffer, sustain or become subject to, as a result of:
(i) the breach by Seller of any representation or warranty made
by Seller in this Agreement;
(ii) the breach by Seller of any covenant or agreement contained
in this Agreement;
(iii) any lawsuit, claim or proceeding of any nature against the
Company or any of its Subsidiaries existing at or prior to the
Closing Date or arising out of any act, transaction, circumstance or
fact occurring prior to the Closing Date and which have not been
disclosed to Buyer; and
(iv) any liabilities or obligations of the Company or any of its
Subsidiaries existing or arising prior to the Closing Date not
disclosed to Buyer.
(b) Buyer making a claim for indemnification under this Section (VI)
(B) (the "Indemnified Party") shall notify the indemnifying party (the
"Indemnifying Party") of the claim in writing promptly after receiving written
notice of any action, lawsuit, proceeding investigation or other claim against
it (if by a third party) or discovering the liability, obligation or facts
giving rise to such claim for indemnification, describing the claim, the amount
thereof (if known and quantifiable), and the basis thereof; provided that the
failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder, except to the extent such failure shall have
prejudiced the Indemnifying Party. With respect to any third party claim, the
Indemnifying Party shall be entitled to participate in the defense of such
action, lawsuit, proceeding, investigation or other claim giving rise to the
Indemnified Party's claim for indemnification at its expense, and at its option
(subject to the limitations set forth below) shall be entitled to control such
defense and to appoint lead counsel of such defense with a nationally recognized
reputable counsel acceptable to the Indemnified Party; provided, further that:
(i) the fees and expenses of such separate counsel incurred prior
to the date that the Indemnifying Party effectively assumes control
of such defense shall be borne by the Indemnifying Party;
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(ii) the Indemnifying Party shall not be entitled to assume
control of such defense and shall pay the fees and expenses of
counsel retained by the Indemnified Party if (A) the claim for
indemnification relates to or arises in connection with any criminal
proceeding, action, indictment, allegation or investigation, (B) the
Indemnified Party reasonably believes an adverse determination with
respect to the action lawsuit, investigation, proceeding or other
claims giving rise to such claim for indemnification would be
detrimental to or injure the Indemnified Party's reputation or future
business prospects, (C) the claim seeks an injunction or equitable
relief against the Indemnified Party, or (D) upon petition by the
Indemnified Party, the appropriate court rules that the Indemnifying
Party failed or is failing to vigorously prosecute or defend such
claim; and
(iii) If the Indemnifying party, with the consent of the
Indemnified Party, shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before
entering into any settlement of a claim or ceasing to defend such
claim, if pursuant to or as a result of such settlement or cessation,
injunction or other equitable relief shall be imposed against the
Indemnified Party or if such settlement does not expressly
unconditionally release the Indemnified Party from all liabilities
and obligations with respect to such claim, without prejudice.
(c) the Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the Parties
reasonably agree that there is a reasonable basis for such claim.
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<PAGE> 14
C. Notices. In order to be effective, any notice or other communication
required or permitted hereunder shall, unless otherwise stated herein, be in
writing and shall be transmitted by messenger, delivery service, mail, or
telecopy at its address or at such other address as a party shall designate in a
written notice to the other parties hereto given in accordance with this
Section. All notices and other communications shall be effective (i) if sent by
messenger or delivery service, when delivered, (ii) if sent by mail, five days
after having been sent by certified mail, with return receipt requested, or
(iii) if sent by telecopier, when sent. In order to be effective, any notice
transmitted to an address outside the United States of America by any means
other than telecopier shall at the time of transmittal be duplicated by
counterpart telecopier notice.
D. Costs of Enforcement. If any party to this Agreement seeks to enforce
its rights under this Agreement by legal proceedings or otherwise, the
non-prevailing party shall pay all reasonable costs and expenses incurred by the
prevailing party, including, without limitation, all reasonable attorneys' fees.
E. Costs, Expenses and Attorneys' Fees. Except as provided in Section
(VI) (D) above with respect to the costs and expenses incurred by a prevailing
party, each party shall be responsible for its own costs and expenses in
relation to the negotiation and preparation of this Agreement, the closing of
the transactions contemplated by this Agreement, the enforcement of this
Agreement, the prosecution or defense of actions for declaratory relief in any
way related to this Agreement or the collection of any sum which becomes due
pursuant to this Agreement.
F. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Seller and the Company may not assign or transfer its
rights hereunder or any interest herein or delegate its duties hereunder except
(i) as permitted by Section (VI) (A), or (ii) with the prior written consent of
the Holders.
G. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
ENTERED INTO AND TO BE PERFORMED WHOLLY WITHIN NEW YORK BY NEW YORK RESIDENTS.
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<PAGE> 15
H. CONSENT TO JURISDICTION. THE COMPANY, BUYER, BUYER GUARANTOR AND
SELLER HEREBY CONSENT TO THE NON-EXCLUSIVE JURISDICTION, VENUE AND FORUM OF ANY
STATE OR FEDERAL COURT IN NEW YORK, NEW YORK WITH RESPECT TO ANY ACTION, WHETHER
COMMENCED BY BUYER OR ANY OTHER PERSON, WHICH, IN WHOLE OR IN PART, IN ANY WAY
ARISES UNDER OR RELATES TO THIS AGREEMENT.
I. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which, when so executed, shall be deemed to be an original and all of
which, when taken together, shall constitute but one and the same agreement.
J. Survival of Representations and Warranties. The representations and
warranties in this Agreement shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
K. Entire Agreement; Amendment. This Agreement (including the exhibits
and schedules) constitute the entire agreement among Seller, Buyer and Buyer
Guarantor with respect to the subject matter hereof, superseding all prior or
contemporaneous negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be modified or amended
or any provision hereof may be waived only with the written consent of Seller,
Buyer and Buyer Guarantor.
L. Company's Indemnification. The Company hereby undertakes to procure
the release of Mak Shiu Tong from the two guaranties which he has executed in
connection with the bank loans related to the two Hong Kong real properties
owned by the Company's subsidiary at Room 3602 and Room 3902 of Convention Plaza
Apartment, Harbour Road, Hong Kong and, failing such release, the Company hereby
indemnifies Mak Shiu Tong and holds him harmless from and against any loss,
liability, deficiency, damage or expense (including, without limitation,
reasonable legal expenses and costs and including interest and penalties) which
Mak Shiu Tong may suffer, sustain or become subject to, as a result of his
having to pay any amount under any of such personal guaranties.
M. Buyer Guarantor's Guaranty. (a) Buyer Guarantor, as primary obligor
and not merely as surety, hereby absolutely, unconditionally and irrevocably
guarantees to Seller the full and punctual payment when due of any and all sums
payable by Buyer pursuant to this Agreement, including without limitation the
payments under Section (III) (A) hereof (the "Guaranteed obligations").
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<PAGE> 16
(b) If Buyer shall default in the payment of any Guaranteed Obligation,
Buyer Guarantor shall forthwith pay on demand to Seller the full amount of the
Guaranteed Obligations due and payable by Buyer.
(c) This guaranty of payment is an irrevocable and continuing obligation
of Buyer Guarantor and is in addition to and not in substitution for any other
guaranties or other security now or hereafter held by Seller. Furthermore, the
obligation of Buyer Guarantor shall remain in full force and effect until all
Guaranteed Obligations shall have been paid in full, regardless of any
circumstances or any provisions of law which might otherwise constitute a
defense or discharge of Buyer Guarantor. The obligations of Buyer Guarantor
hereunder shall not be limited or affected by any change in the corporate
existence, structure or ownership of Buyer, or any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors or other similar proceeding
affecting Buyer or its assets. Seller shall not be obliged to take any action
against Buyer or the security before being entitled to payment from Buyer
Guarantor hereunder. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time payment by Buyer with respect to
the Guaranteed Obligations is rescinded or must otherwise be restored or
returned to Buyer upon the insolvency, bankruptcy or reorganization of Buyer or
otherwise, all as though such payment had not been made.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, this Agreement
to become effective as of the date first above written.
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<PAGE> 17
GREAT CHINA INDUSTRIES LIMITED,
a British Virgin Islands corporation
By: /s/
------------------------------------
THOMAS TONG
Title: DIRECTOR
/s/
--------------------------------------
THOMAS TONG LONG TIN
C. P. INVESTMENT LTD.,
a British Virgin Islands corporation
By: /s/
------------------------------------
MAK SHIU TONG
Title: DIRECTOR
CHINA PACIFIC, INC.,
a Nevada corporation
By: /s/
------------------------------------
CHUN HING LO
Title: DIRECTOR
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