China Pacific Inc – ‘8-K’ for 1/15/97 – EX-10

As of:  Tuesday, 1/21/97   ·   For:  1/15/97   ·   Accession #:  1026700-97-6   ·   File #:  0-26232

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         3     11K 
 2: EX-4        Exhibit 4.1 Common Stock Purchase Warrant              6     22K 
 3: EX-10       Exhibit 10.1 Form of 9% Convertible Note               8     37K 
 4: EX-99       Exhibit 99.1 Press Release Re: Offering                1      6K 

EX-10   —   Exhibit 10.1 Form of 9% Convertible Note

EX-10
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THIS NOTE AND THE  SECURITIES  TO BE ISSUED  UPON ITS  CONVERSION  HAVE NOT BEEN
REGISTERED  UNDER THE UNITED  STATES  SECURITIES  ACT OF 1933,  AS AMENDED  (THE
"ACT"),  AND MAY NOT BE  OFFERED OR SOLD IN THE  UNITED  STATES  (AS  DEFINED IN
REGULATION S UNDER THE ACT) OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S.  PERSONS
(AS DEFINED IN REGULATION S) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN
EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE ACT AND APPLICABLE  STATE
SECURITIES LAWS.  MOREOVER,  THIS NOTE MAY NOT BE EXERCISED BY OR ON BEHALF OF A
U.S. PERSON UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.                                                                      

NO.                                                          $U.S.              
   ----------                                                     --------------

CHINA PACIFIC, INC.     

9% CONVERTIBLE NOTE DUE JANUARY   , 1999    
                     ---

       THIS NOTE is one of a duly  authorized  issue of Notes of China  Pacific,
Inc., a corporation  duly  organized and existing under the laws of the State of
Nevada (the  "Company"),  designated as its 9%  Convertible  Notes Due January ,
                                                                              --
1999, in an aggregate  principal  amount not exceeding  Fifteen  Million  United
States Dollars (U.S.$15,000,000).                                               

FOR VALUE  RECEIVED,  the  Company  promises  to pay to           
                                                              ------------------
the registered holder hereof and its successors and assigns (the "Holder"),  the
principal  sum of                                        United  States  Dollars
----------------------------------------      
(U.S.$                   ) on  January  ,  1999,  (the "Maturity  Date") and to 
-------------------                                                 
pay interest on the  principal sum  outstanding  at the rate of 9% per annum due
and payable quarterly.  Accrual of interest shall commence on the first business
day to occur after the date hereof and shall  continue  until payment in full of
the  principal  sum has been made or duly  provided for. The interest so payable
will be paid to the person in whose  name this Note (or one or more  predecessor
Notes) is registered on the records of the Company  regarding  registration  and
transfers  of the Notes  (the  "Note  Register");  provided,  however,  that the
Company's  obligation to a transferee of this Note arises only if such transfer,
sale or other disposition is made in accordance with the terms and conditions of
the  Offshore  Securities  Subscription  Agreement  dated as of  January       ,
                                                                       -------
1997  between  the  Company  and the  Buyer  named  therein  (the  "Subscription
Agreement").  The  principal  of, and interest on, this Note are payable in such
coin or  currency  of the United  States of America as at the time of payment is
legal  tender for  payment of public and  private  debts,  at the  address  last
appearing on the Note  Register of the Company as  designated  in writing by the
Holder  hereof from time to time.  The Company will pay the principal of and all
accrued and unpaid  interest due upon this Note on the Maturity  Date,  less any
amounts  required by law to be deducted or withheld,  to the Holder of this Note
as of the tenth day prior to Maturity  Date and  addressed to such Holder at the
last address appearing on the Note Register.  The forwarding of such check shall
constitute a payment of principal  and interest  hereunder and shall satisfy and
discharge the liability for principal and interest on this Note to the extent of
the sum represented by such check plus any amounts so deducted.                 

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This Note is subject to the following additional provisions:          

     1. The Notes are issuable in  denominations  of Two Hundred Fifty  Thousand
United States Dollars (U.S.  $250,000) and integral multiple thereof.  The Notes
are exchangeable  for an equal aggregate  principal amount of Notes of different
authorized denominations,  as requested by the Holders surrendering the same. No
service charge will be made for such registration or transfer or exchange.      

     2. The Company shall be entitled to withhold from all payments of principal
of, and  interest  on, this Note any amounts  required to be withheld  under the
applicable  provisions of the United States income tax or other  applicable laws
at the time of such payments.                                                   

     3. This Note has been issued subject to investment  representations  of the
original  purchaser  hereof and may be transferred or exchanged in the U.S. only
in  compliance  with the  Securities  Act of 1933,  as amended (the "Act"),  and
applicable  state securities laws. Prior to due presentment for transfer of this
Note,  the  Company  and any agent of the  Company may treat the person in whose
name this Note is duly  registered on the  Company's  Note Register as the owner
hereof for the purpose of  receiving  payment as herein  provided  and all other
purposes,  whether or not this Note be overdue,  and neither the Company nor any
such agent shall be affected by notice to the contrary.                         

     4. The Holder of this Note is  entitled,  at its  option,  to  convert  the
original  principal amount (the "Original  Amount") of this Note into fully paid
and non-assessable  shares of common stock, $.001 par value, of the Company (the
"Common Stock") at a conversion price (the  "Conversion  Price") equal to eighty
percent (80%) of the average closing bid price of the Company's  Common Stock as
reported by Nasdaq over the five (5) trading-day  period ending on the day prior
to the date of a written  notice from a holder of this Note of such  conversion;
provided,  however,  that the Conversion Price shall in no event be greater than
$8.00 per share nor less than $4.00 per share, and provided,  further,  that the
Company  shall be  required  to  convert  no more than  one-fourth  (1/4) of the
Original  Amount  until  after  May , 1997 (120  days  after the issue  hereof),
one-half  (1/2) of the Original  Amount  until after  September , 1996 (240 days
after the issue hereof),  three-fourths (3/4) of the Original Amount until after
January , 1998 (360 days after the issue hereof) and all of the Original  Amount
until after May , 1998 (480 days after the issue hereof).                       

     5.  Conversions of this Note shall be effectuated by surrendering the Notes
to be converted  (with a copy,  by facsimile or courier,  to the Company) to the
Company  with the Form of  Conversion  Notice  (attached  hereto as  Exhibit  A)
executed  by the  Holder of this Note  evidencing  such  Holder's  intention  to
convert  this Note or a  specified  portion  (as  above  provided)  hereof,  and
accompanied,  if required by the Company,  by proper assignment hereof in blank.
No  fractional  or scrip  representing  fractions  of  shares  will be issued on
conversion, but the number of shares issuable shall be rounded up to the nearest
whole number of shares. The date on which notice of conversion is given shall be
deemed to be the date on which the Holder  has  delivered  this  Note,  with the
conversion  notice duly executed,  to the Company,  or if earlier,  the date set
forth in such notice of conversion if the Note is received by the Company within
three business days thereafter.                                                 

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     6. No amount of  accrued  but  unpaid  interest  otherwise  payable  by the
Company shall be subject to conversion except, and unless,  that the Company may
elect, at its sole option,  to deliver shares of Common Stock,  which shares may
be issued by the  Company as payment  in full of any such  interest  on the same
terms as would otherwise apply to the conversion of the principal amount hereof.

     7. The  Company  shall be  entitled,  at its sole  option  and upon  proper
notice, to automatically  convert ("Forced Conversion") any amount remaining due
and payable  under this Note into Common  Stock if, and only if, the closing bid
price of the  Common  Stock  is  greater  than  $8.00  for a period  of at least
fourteen  (14)  consecutive  trading days ending not more than two business days
prior to the  giving of notice by the  Company  of its  election  to cause  such
Forced Conversion. In the event the Company elects to cause a Forced Conversion,
the Company shall notify the Holder in writing  ("Notice of Forced  Conversion")
by facsimile  transmission  and by certified  mail at the number and address set
forth for the Holder  below,  or at such other  number and address as the Holder
may notify the Company of from time to time.  Notice of Forced  Conversion shall
be deemed  to have been  given as of the date such  notice  was  transmitted  by
facsimile or three  business days after the date  deposited in the United States
mail, certified and postage pre-paid, whichever is earlier. The Conversion Price
with  respect  to any  such  Forced  Conversion  shall  be the  then  applicable
Conversion Price on the date of such Notice of Forced  Conversion.  Upon receipt
of a Notice  of Forced  Conversion,  the  Holder  shall  promptly  return to the
Company  this Note and,  upon  receipt by the  Company of the Note,  the Company
shall issue the shares issuable as a result of such Forced Conversion.          

     8. No  provision of this Note shall alter or impair the  obligation  of the
Company,  which is absolute  and  unconditional,  to pay the  principal  of, and
interest on, this Note at the time, place and rate, and in the coin or currency,
herein prescribed.  This Note ranks equally and ratably with all other Notes now
or hereafter issued under the terms set forth herein.                           

     9. The Company hereby  expressly waives demand and presentment for payment,
notice of nonpayment,  protest, notice of protest, notice of dishonor, notice of
acceleration  or intent to accelerate,  bringing of suit and diligence in taking
any action to collect  amounts  called for  hereunder  and shall be directly and
primarily  liable  for the  payment  of all sums  owing and to be owing  hereon,
regardless  of and  without any  notice,  diligence,  act or omission as or with
respect to the collection of any amount called for hereunder.                   

     10. The Company agrees to pay all costs and expenses,  including reasonable
attorney's  fees,  which may be incurred by Holder in collecting  any amount due
under this Note.                                                                

 11. The following shall constitute "Events of Default" under this Note:

          (a)  Any default in the payment of principal or interest on this Note;

          (b)  If any of the  representations  or warranties made by the Company
               herein,  in  the  Offshore  Securities   Subscription   Agreement
               relating to the  purchase  and sale of Notes  between the Company

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               and  the  Holder  (the  "Subscription  Agreement"),   or  in  any
               certificate  or  financial  or  other  statements  heretofore  or
               hereafter  furnished by or on behalf of the Company in connection
               with the execution and delivery of this Note or the  Subscription
               Agreement shall be false or misleading in any material respect at
the time made;                                    

          (c)  If the  Company  shall  fail to  perform  or  observe  any  other
               covenant, term, provision,  condition, agreement or obligation of
               the  Company  under  this Note and such  failure  shall  continue
               uncured  for a period of seven  (7) days  after  notice  from the
Holder of such failure;                           

          (d)  If the Company shall (i) become insolvent,  (ii) admit in writing
               its  inability  to pay its debts as they  mature,  (iii)  make an
               assignment  for the benefit of creditors or commence  proceedings
               for  its  dissolution,  or  (iv)  apply  for  or  consent  to the
               appointment of a trustee,  liquidator or receiver for it or for a
substantial part of its property or business;     

          (e)  If a trustee,  liquidator or receiver  shall be appointed for the
               Company or for a  substantial  part of its  property  or business
               without  its consent and shall not be  discharged  within  thirty
(30) days after such appointment;                 

          (f)  If any governmental agency or any court of competent jurisdiction
               at the instance of any  governmental  agency shall assume custody
               or  control  of the  whole  or  any  substantial  portion  of the
               properties  or assets of the Company  and shall not be  dismissed
within thirty (30) days thereafter;               

          (g)  If any money judgment, writ or warrant of attachment,  or similar
               process, except mechanics and materialmen's liens incurred in the
               ordinary  course  of  business,  in  excess  of  $500,000  in the
               aggregate shall be entered or filed against the Company or any of
               its  properties  or other  assets  and  shall  remain  unvacated,
               unbonded or unstayed  for a period of fifteen (15) days or in any
               event later than five (5) days prior to the date of any  proposed
sale thereunder;                                  

          (h)  If   bankruptcy,   reorganization,   insolvency  or   liquidation
               proceedings or other  proceedings for relief under any bankruptcy
               law or any law for the relief of debtors  shall be  instituted by
               or against the Company  and, if  instituted  against the Company,
               shall not be dismissed,  stayed or bonded within ninety (90) days
               after  such  institution  or the  Company  shall by any action or
               answer   approve  of,  consent  to,  or  acquiesce  in  any  such
               proceedings or admit the material  allegations  of, or default in
   answering a petition filed in any such proceeding; or

          (i)  If the  Company  shall have its  Common  Stock  delisted  from an
exchange or Nasdaq.                               

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     Upon  the  occurrence  of  an  Event  of  Default,  then,  or at  any  time
thereafter,  and in each and every such case, unless such Event of Default shall
have been waived in writing by the Holder  (which  waiver shall not be deemed to
be a waiver of any  subsequent  default)  at the option of the Holder and in the
Holder's sole discretion,  the Holder may consider this Note immediately due and
payable,  without  presentment,  demand,  protest or notice of any kind,  all of
which  are  hereby  expressly  waived,  anything  herein or in any note or other
instruments  contained  to the  contrary  notwithstanding,  and the  Holder  may
immediately,  and without expiration of any period of grace, enforce any and all
of the  Holder's  rights and  remedies  provided  herein or any other  rights or
remedies afforded by law.                                                       

12.  For so long as any amount  payable  under  this Note  remains  unpaid,  the
Company shall furnish to the Holder the following information:        

     (a)  No later than ninety (90) days  following the end of each fiscal year,
          beginning with the fiscal year ending December 31, 1996,  consolidated
          balance  sheets,  statements of income and statements of cash flow and
          shareholders'  equity of the  Company  and its  subsidiaries,  if any,
          prepared in accordance with generally accepted  accounting  principles
          ("GAAP"),  and  audited by a firm of  independent  public  accountants
(i.e., Form 10-K or Form 10-KSB).                           

     (b)  Within  forty-five (45) days after the end of each quarter (except the
          fourth  quarter) of each fiscal  year,  consolidated  balance  sheets,
          statements  of income and  statements  of cash flow of the Company and
its subsidiaries, if any (i.e., Form 10-Q or Form 10-QSB).  

13.  The Company covenants and agrees that until all amounts due under this Note
     have been paid in full,  by  conversion  or  otherwise,  unless  the Holder
waives compliance in writing, the Company shall:                      

     (a)  Give  prompt  written  notice to the Holder of any Event of Default as
          defined in this Note or of any other  matter which has resulted in, or
          could reasonably be expected to result in, a materially adverse change
in its financial condition or operations.                   

     (b)  Give  prompt  written  notice to the  Holder of any  claim,  action or
          proceeding  which, in the event of any unfavorable  outcome,  would or
          could  reasonably be expected to have a material adverse effect on the
financial condition of the Company.                         

     (c)  At all times  reserve and keep  available  out of its  authorized  but
          unissued  stock,  for the purpose of effecting the  conversion of this
          Note such  number  of its duly  authorized  shares of Common  Stock as
          shall from time to time be sufficient to effect the  conversion of the
          outstanding  principal  balance  of this  Note  into  shares of Common
Stock.                                                      

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     (d)  Upon receipt by the Company of evidence reasonably  satisfactory to it
          of the loss, theft,  destruction or mutilation of this Note and (i) in
          the  case of loss,  theft  or  destruction,  of  indemnity  reasonably
          satisfactory to it, or (ii) in the case of mutilation,  upon surrender
          and  cancellation  of this Note,  the Company,  at its  expense,  will
          execute  and deliver a new Note,  dated the date of the lost,  stolen,
destroyed or mutilated Note.                                

14.  Until such time as this Note  becomes  fully  convertible  as  provided  in
     paragraph 4 above (480 days after the issue hereof),  the Company covenants
     and agrees that it will not engage in any offering of equity securities, or
     securities  convertible into equity  securities of the Company,  other than
     offerings  made pursuant to a  registration  statement  filed with the U.S.
     Securities  and Exchange  Commission,  with any third party  without  first
     offering the holder hereof the  opportunity  (which shall remain open for a
     period  of ten  business  days  from the date the  holder  receives  notice
     thereof)  to  purchase  up to  all  of  such  securities  offered  (in  the
     discretion of the holder) on the terms and  provisions on which the Company
     proposes to offer such securities to third parties.  If the holder notifies
     the  Company  of its intent to  exercise  its right of first  refusal,  the
     holder  must  deliver  to the  Company,  within  five  business  days after
     notifying  the  Company of its  election  to  exercise  such right of first
     refusal,   documentation  satisfactory  to  the  Company  and  its  counsel
     accompanied  by  payment  in full of the price of such  securities.  If the
     holder  notifies the Company that it is not  exercising  its right of first
     refusal,  or if the  holder  fails to notify  the  Company of its intent or
     fails to deliver  documentation  and payment  within the periods  permitted
     therefor,  the right of first  refusal  shall  lapse  with  respect  to the
     proposed  sale of  securities  and the  Company  shall be free to sell such
     securities on the terms proposed. In the event the holder fails to exercise
     the right of first refusal and the Company completes the sale of securities
     which are the subject of such right of first  refusal,  the  Company  shall
     promptly  notify the holder (in any event not later than two business  days
     after  the  fact) of the date of  closing  and the  substantive  terms  and
     provisions of such transaction.  In the event there is more than one holder
     of Notes of like tenor,  the right of first refusal granted hereby shall be
available proportionately to each such holder.                        

15.  The Holder of this Note agrees to bear the cost of any U.S. withholding tax
on interest payable under this Note.                                  

16.  No  recourse  shall be had for the  payment  of the  principal  of,  or the
     interest  on, this Note,  or for any claim based  hereon,  or  otherwise in
     respect hereof, against any incorporator, shareholder, officer or director,
     as  such,  past,  present  or  future,  of the  Company  or  any  successor
     corporation, whether by virtue of any constitution, statute or rule of law,
     or by the  enforcement of any assessment or penalty or otherwise,  all such
     liability being, by the acceptance  hereof and as part of the consideration
for the issue hereof, expressly waived and released.                  

17.  The Holder of this Note,  by  acceptance  hereof,  agrees that this Note is
     being  acquired  for  investment  and that Holder  will not offer,  sell or
     otherwise  dispose of this Note or the shares of Common Stock issuable upon
     exercise  thereof  except  under  circumstances  which will not result in a
     violation of the Act or any  applicable  state Blue Sky law or similar laws
relating to the sale of securities.                                   

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18.  In case  any  provision  of this  Note  is  held  by a court  of  competent
     jurisdiction   to  be   excessive   in  scope  or   otherwise   invalid  or
     unenforceable,  such  provision  shall be adjusted  rather than voided,  if
     possible, so that it is enforceable to the maximum extent possible, and the
     validity and  enforceability of the remaining  provisions of this Note will
not in any way be affected or impaired thereby.                       

19.  This Note  constitutes  the full and  entire  understanding  and  agreement
     between  the Company  and the Holder  with  respect to the subject  hereof.
     Neither this Note nor any term hereof may be amended, waived, discharged or
     terminated other than by a written instrument signed by the Company and the
Holder.                                                               

20.  The Company hereby agrees that, upon demand of the Holders of not less than
     fifty  percent  (50%) of the then  outstanding  Notes or the holders of not
     less than fifty percent (50%) of the shares of Common Stock issued pursuant
     to  conversion  of Notes,  as a result of a regulatory  development  or any
     "no-action"  or  written  interpretive  guidance  from the  Securities  and
     Exchange Commission which calls into question the ability of the holders of
     the Notes,  or the shares  issuable upon conversion of the Notes, to resell
     the Notes,  or the shares  issuable upon  conversion of the Notes,  without
     registration, the Company will file, and use its reasonable best efforts to
     cause to become  effective  a  registration  statement  on Form S-3 (or any
     other  available  form) under the Securities Act covering the resale of the
     Notes and the  shares  issuable  upon  conversion  of the  Notes.  Any such
     registration statement shall remain effective for up to twelve (12) months,
     or until all of the shares  issuable upon conversion of the Notes are sold,
     whichever is earlier.  The Company  shall provide the holders of the Notes,
     or the shares  issuable upon  conversion of the Notes,  with such number of
     copies of the prospectus as shall be reasonably requested to facilitate the
     sale of the Notes and the shares issuable upon conversion of the Notes. The
     Company  shall  bear all  expenses  incurred  in  connection  with any such
     registration, excluding discounts and commissions and other expenses of the
holders (including, but not limited to any holder's counsel's fees).  

21.  This Note shall be governed by the construed in accordance with the laws of
the State of Nevada.                                                  

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed by an officer thereunto duly authorized.                               

 CHINA PACIFIC, INC.

Dated:  January      , 1997    By:                                              
                     ---------------------------------
 Name: Mak Shiu Tong
 Title:    President

Note No.                $                                                       
----------       -----------------                              
Name:                                                                           
-----------------             
Mailing Address:                                                                
-----------------             

-----------------             
Facsimile #:                                                                    
-----------------             

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 EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $                       of 
                                                   -----------------------
the above Note No.         into Shares of Common  Stock of  China Pacific,  Inc.
---------                                   
(the  "Company")  according to the  conditions  set forth in the Note, as of the
date written below.                                                             

The undersigned represents that it is not a US person as defined in Regulation S
promulgated  under the Act, and is not  converting the Notes on behalf of any US
Person.                                                                         

                     ---------------------------------------
 Date of Conversion*

                     ---------------------------------------
         Applicable Conversion Price

                     ---------------------------------------
        Principal Amount Converted

                     ---------------------------------------
           Shares Issuable on Conversion

                     ---------------------------------------
Signature         

Name:             
                          ----------------------------------

Address:          
                             -------------------------------

------------------------                                                        
*    The original Note and Notice of Conversion  must be received by the Company
by the third business date following the Date of Conversion.          

8 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
Filed on:		1/21/97
For Period End:		1/15/97
		12/31/96		5					10KSB,  10KSB/A,  NT 10-K
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