SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CHINA PACIFIC, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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CHINA PACIFIC, INC.
CHENGDU IRON & STEEL OFFICE BUILDING,
QINGBAIJIANG DISTRICT,
CHENGDU, SICHUAN PROVINCE,
THE PEOPLE'S REPUBLIC OF CHINA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, NOVEMBER 11, 1998
To the Shareholders of China Pacific, Inc.:
An Annual Meeting of Shareholders of China Pacific, Inc. (the "Company")
will be held at the Meeting Room on the Third Floor of Xi Yuan Hotel, Southern
Sector of Guihua Street, Guanghan, Chengdu, Sichuan Province, The People's
Republic of China at 10:00 a.m., on Wednesday, November 11, 1998 for the
following purposes:
1. To elect four directors of the Company to hold office until the next
annual meeting of shareholders or until their successors are duly
elected and qualified.
2. To consider a proposal to ratify the appointment of Arthur Andersen &
Co. SC as the Company's independent certifying accountants.
3. To approve the Company's 1998 Stock Option Plan.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice. Only shareholders of record at the close of business
on September 24, 1998 are entitled to notice of, and to vote at, the meeting and
any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
VOTED.
By Order of the Board of Directors
Albert Choi
Secretary
October 20, 1998
CHINA PACIFIC, INC.
CHENGDU IRON & STEEL OFFICE BUILDING,
QINGBAIJIANG DISTRICT,
CHENGDU, SICHUAN PROVINCE,
THE PEOPLE'S REPUBLIC OF CHINA
____________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 11, 1998
_____________
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors of
China Pacific, Inc. (the "Company") for use at the 1998 Annual Meeting of the
Shareholders of the Company and at any adjournment thereof (the "Annual
Meeting"). The Annual Meeting is scheduled to be held at the Meeting Room on
the Third Floor of Xi Yuan Hotel, Southern Sector of Guihua Street, Guanghan,
Chengdu, Sichuan Province, The People's Republic of China, on Wednesday,
November 11, 1998 at 10:00 a.m. local time. This Proxy Statement and the
accompanying proxy card will first be sent to shareholders on or about October
20, 1998.
VOTING AND SOLICITATION
Only shareholders of record at the close of business on September 24, 1998
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, 9,031,311 shares of the
Company's common stock, $.001 par value (the "Common Stock"), were outstanding.
Holders of Common Stock are entitled to one vote for each share of Common Stock
held. As a result of the Company's recent 1 for 5 reverse stock split, which
was effective September 28, 1998, the number of shares of Common Stock
outstanding was reduced from 9,031,311 to approximately 1,806,236.
The cost of soliciting proxies will be borne by the Company. Proxies may
also be solicited by certain of the Company's directors, officers and employees,
without additional compensation, personally or by telephone, facsimile or
letter.
INCOMPLETE PROXIES AND REVOCATION OF PROXIES
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting prior to the closing of the polls, will be voted in accordance with the
specifications made thereon. Properly executed proxies so received and on which
no specification has been made by the shareholder will be voted FOR the election
to the Board of Directors of the nominees of the Board of Directors named
herein, FOR the ratification of the appointment of the designed independent
accountants, FOR approval of the 1998 Stock Option Plan, and as the proxy
holders deem advisable on other matters that may come before the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or time, or
by attending the Annual Meeting and voting in person.
1
QUORUM, ABSTENTIONS AND BROKER NON-VOTES
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum.
Directors will be elected by a plurality of votes cast at the Annual
Meeting. Each of the other matters scheduled to come before the Annual Meeting
requires the approval of a majority of the votes cast at the Annual Meeting. A
stockholder who abstains from voting on any or all matters will be deemed
present at the Annual Meeting for quorum purposes, but will not be deemed to
have voted on the particular matter (or matters) as to which the stockholder has
abstained. Similarly, in the event a nominee (such as a brokerage firm) holding
shares for beneficial owners votes on certain matters pursuant to discretionary
authority or instructions from beneficial owners, but with respect to one or
more other matters does not receive instructions from beneficial owners and/or
does not exercise discretionary authority (a so-called "broker non-vote"), the
shares held by the nominee will be deemed present at the meeting for quorum
purposes but will not be deemed to have voted on such other matters. Therefore,
abstentions and broker non-votes will have no effect upon the election of
directors or any other matter.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at next year's annual meeting must be received by the
Company at its principal executive offices no later than February 6, 1999 in
order that they may be included in the proxy statement and form of proxy
relating to the 1999 annual meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Four directors are to be elected to serve until the next annual meeting of
shareholders and until their respective successors are elected and qualified.
The Board of Directors has nominated the four persons specified in the table
below to serve as directors (the "Nominees"). Each of the Nominees is currently
serving as a director of the Company (Clement Shiu-Tong Mak, Yuk-Ching Cheng,
Pak-Hoo Kwan, Guo-Liang Zhang, Xin-Min Zhang and Samuel Olenick resigned as a
director on June 30, July 24, May 25, July 24, March 1, and July 24, 1998,
respectively. Mr. Thomas Long-Tin Tong and Jian-Sheng Tan were appointed as
directors in September and March 1996 respectively, and Chun-Hing Lo and
Xin-Chuan Huang were appointed as directors in July 1998). In addition, Mr.
Tong was appointed Acting President after the purchase of 36.19% of the
outstanding shares of the Company's Common Stock by Great China Industries
Limited, a British Virgin Islands corporation which is wholly owned by Mr. Tong.
SEE "Significant Acquisition of the Company's Common Stock."
If any Nominee is unable or unwilling to serve as a director, proxies may
be voted for substitute nominees designated by the Board of Directors, or for
such lesser number of directors in accordance with the Company's Bylaws. The
Board of Directors has no reason to believe that any Nominee will be unable or
unwilling to serve as a director if elected. Directors shall be elected from
those persons duly nominated for such positions by a plurality of the votes
actually cast by shareholders entitled to vote at the Annual Meeting who are
present in person or by proxy. Any vacancy occurring between shareholders'
meetings, including vacancies resulting from an increase in the number of
directors, may be filled by the Board of Directors. A director elected to fill
a vacancy shall hold office until the next annual shareholders' meeting.
INFORMATION REGARDING NOMINEES
Information with respect to each Nominee as of the Record Date is set forth
below. The information as to age, principal occupation and directorships held
has been furnished by each such Nominee.
2
Served as Director
Name and Age Principal Occupation (1) Continuously Since
- ------------ ------------------------ ------------------
Thomas Long-Tin Tong (33) Acting President, Chief Financial Officer, and Director 1996
(Principal Executive and Financial and Accounting Officer)
Chun-Hing Lo (43) Chief Operating Officer and Director 1998
Xin-Chuan Huang (48) Director 1998
Jian-Sheng Tan (39) General Manager of the China Construction Bank-Guangdong 1996
Branch, International Division
(1) Unless indicated otherwise in the table or in the section captioned
"Information Regarding Nominees," the individuals named in the table have
held their positions for more than five years.
The following is a biographical summary of the business experience of the
Nominees.
Thomas Long-Tin Tong. Mr. Tong has served as Financial Controller of the
Company since 1994 and as Chief Financial Officer and director of the Company
since 1996. On September 14, 1998, Mr. Tong was appointed as Acting President
of the Company. SEE "Significant Acquisition of the Company's Common Stock."
Prior to joining the Company, Mr. Tong served as an audit supervisor for Ho and
Ho & Co., a certified public accounting firm in Hong Kong, from 1988 to 1994.
Chun-Hing Lo. Mr. Lo, currently serving as Vice-General Manager and
director of Chengdu Chengkang Iron and Steel Company Limited ("Chengdu Steel"),
was promoted to Chief Operating Officer of the Company in July 1998. He joined
the Company in 1997 and has held positions of increasing responsibility at
Chengdu Steel. Before joining the Company, he was a management consultant in
1997 for Shanghai Esthepia Co., Ltd., a Sino-Hong Kong joint venture company
engaged in plywood manufacturing in Shanghai, The People's Republic of China,
and an Assistant to Chairman for Shiny International Group, a printing concern
located in The People's Republic of China, from 1994 to 1996.
Xin-Chuan Huang. Prior to his appointment as a director of the Company,
from 1995 to 1997, Mr. Huang was the executive director and legal representative
of both China Treasure Property Development Company and China Treasure
Industrial Enterprises, which are each sub-subsidiaries of Open View Properties
Ltd. From 1993 to 1994, Mr. Huang was an officer for Hui Yan Development Co.,
Ltd., a property development company. Upon his acceptance of appointment as a
director of the Company, Mr. Huang resigned his position as executive director
and legal representative of China Treasure Property Development Company and
China Treasure Industrial Enterprises.
Jian-Sheng Tan. Mr. Tan has served as a director of the Company since
1996. From 1989 to 1994, Mr. Tan served as Department Head of the International
Division of the China Construction Bank-Guangdong Branch, and has served as
General Manager for the same company since 1994. Since September 14, 1998, the
China Construction Bank-Guangdong Branch has not held any shares of the
Company's Common Stock.
INFORMATION REGARDING EXECUTIVE OFFICERS
The following tables sets forth the names, ages and offices of the present
executive officers of the Company who are not directors. The periods during
which such persons have served in such capacities are indicated in the
description of business experience of such persons below. Information with
respect to executive officers of the Company who are also directors is set forth
above. SEE "Information Regarding Nominees."
Name Age Position
---- --- --------
Albert Choi 39 Secretary
Albert Choi joined the Company in 1996 as a Manager in the Company's United
States office. Since 1998, Mr. Choi has served in the United States as Vice
President of Kiu Yin Investment Inc., a California corporation. Before joining
the Company, Mr. Choi served in the United States from 1994 to 1996 as a
representative of Express Office Automation Co., Limited., a Hong Kong-based
company.
There are no family relationships among any of the directors or executive
officers of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
3
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Report any
failure to file by these dates during 1997.
Clement Shiu Tong Mak, who is no longer associated with the Company, but
who was formerly the Company's President, Chief Executive Officer, and director,
as well as a beneficial owner of in excess of 10% of the Company's Common Stock,
did not, to the Company's knowledge, make the filings discussed herein during
the fiscal year ended December 31, 1997. Yuk-Ching Cheng, Pak-Hoo Kwan,
Guo-Liang Zhang, Xin-Min Zhang, and Samuel Olenick, who are no longer associated
with the Company, but each of whom formerly served as a director of the Company,
did not, to the Company's knowledge, make the filings discussed herein during
the fiscal year ended December 31, 1997.
Thomas Long-Tin Tong and Jian-Sheng Tan, who presently serve as directors
of the Company, were late in making the filings discussed herein for the fiscal
year ended December 31, 1997.
COMMITTEES AND ATTENDANCE OF THE BOARD OF DIRECTORS
The Company presently maintains an Audit Committee of its Board of
Directors and does not maintain either a standing Compensation or Nominating
Committee. The Company intends to evaluate the creation of a standing
Compensation Committee at such time as the Board deems appropriate.
Currently, the Audit Committee consists of Chun-Hing Lo, Jian-Sheng Tan and
Xin-Chuan Huang. This committee consults with the Company's auditors concerning
their auditing plan, the results of their audit, the appropriateness of
accounting principles utilized by the Company and the adequacy of the Company's
general accounting controls. This committee met twice during 1998.
During the year ended December 31, 1997, the Board of Directors held 14
formal meetings. With the exception of Messrs. Jian-Sheng Tan, Guo-Liang Zhang,
and Xin Min-Zhang, each director (during the period in which each such director
served) attended at least 75% of the meetings of the Board of Directors.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company
during the fiscal year ended December 31, 1997 of the Chief Executive Officer
and each of the next four most highly compensated executive officers of the
Company whose compensation exceeded $100,000 (the "Named Officers"). Except for
the Chief Executive Officer, the compensation of each of the Company's other
executive officers did not exceed $100,000.
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Stock Options($)
- --------------------------- ---- ---------- --------- ---------------- ----------------
Clement Mak Shiu Tong 1997 336,352 - - (1) -
President, Chief Executive Officer 1996 316,947 - - (1) -
and Chairman until June 30,1998
1995 194,069 - - (1) -
(1) Although the Company's executive officers receive certain perquisites
such as auto allowances and Company-provided life insurance, the value
of such perquisites did not exceed the lesser of $50,000 or 10% of the
officer's salary.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Board of Directors, after taking into consideration the compensation of
persons in similar positions in comparable companies, set the compensation of
the Company's Chief Executive Officer during the fiscal year ended December 31,
1997, Mr. Clement Shiu-Tong Mak. Each member of the Board of Directors
participated in determining such compensation. The Chief Executive Officer's
compensation was not directly tied to the performance of the Company. During
the fiscal year ended December 31, 1997, Mr. Mak was responsible for determining
the compensation of the Company's other executive officers. The Board of
Directors notes that Mr. Mak is no longer employed by the Company.
4
The Board of Directors
----------------------
Thomas Long-Tin Tong
Chun-Hing Lo
Xin-Chuan Huang
Jian-Sheng Tan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company does not have a standing Compensation
Committee. However, Mr. Clement Shiu-Tong Mak, who served as President, Chief
Executive Officer, and Chairman of the Company during the fiscal year ended
December 31, 1997, and who, in that capacity, participated in deliberation of
the Board of Directors concerning executive officer compensation, currently
serves as the Chairman of the Board of CCT Telecom Holdings Ltd., and is a
member of the Board of Directors of CCT Telecom Holdings Ltd. and that Board's
compensation committee. During the fiscal year ended December 31, 1997, Mr.
Pak-Hoo Kwan served as a director of the Company and as managing director of CTT
Telecom Holdings Ltd. Neither Mr. Mak nor Mr. Kwan hold positions with the
Company at this time.
COMPENSATION OF DIRECTORS
The Company reimburses each director for all expenses of attending board
meetings. Otherwise, no compensation of any nature is paid to non-employee
directors, and no compensation is paid to employee directors for their service
as directors.
EMPLOYMENT CONTRACTS
The Company has no employment agreements with any of its employees and has
no arrangements of any nature which would result in payments to officers or
other persons as a result of any termination of employment or change in control
of the Company.
BENEFICIAL OWNERS OF COMMON STOCK
The following table is furnished as of the Record Date, to indicate
beneficial ownership of shares of the Company's Common Stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Common Stock, (2) each director, nominee for
director and Named Officer of the Company, individually, and (3) all officers
and directors of the Company as a group. The information in the following table
was provided by such persons.
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership (1) (2) Percent of Class (2) (3)
- ------------------------------------ ---------------------------- ------------------------
Great China Industries Limited 3,271,429 36.19%
17C, Unionway Commercial Center
283 Queen's Road Central, Hong Kong
Chun-Hing Lo -0- 0.0%
Thomas Long-Tin Tong 3,271,429 (2) 36.19%
Flat C, 12/F, Block 5, Hanford Garden
333 Castle Peak Bay, NT, Hong Kong
Xin-Chuan Huang -0- 0.0%
Jian-Sheng Tan -0- 0.0%
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (5 PERSONS) 3,271,429 (2) 36.19%
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws, where applicable, and the information
contained in the footnotes to the table.
(1) All shares of Common Stock indicated as being held by Mr. Tong are held of
record by Great China Industries Limited ("Great China Industries"), a
British Virgin Islands corporation. Mr. Tong is the sole shareholder of
Great China Industries.
(3) Based on 9,031,311 total outstanding shares of Common Stock on the Record
Date. As a result of the Company's recent 1 for 5 reverse stock split,
which was effective September 28, 1998, there are now approximately
1,806,236 shares of Common Stock outstanding.
5
SIGNIFICANT ACQUISITION OF THE COMPANY'S COMMON STOCK
On September 14, 1998, Great China Industries Limited, a British Virgin
Islands corporation ("Great China Industries"), purchased 3,271,429 shares of
the Company's Common Stock, representing 36.19% of the Company's outstanding
voting securities, from C.P. Investment Limited, a British Virgin Islands
corporation ("C.P. Investment"), for US$0.2761 per share, or a total of
US$903,225.81 (the "Purchase Price"). After the Company's recent 1 for 5
reverse stock split, which was effective September 28, 1998, this is equivalent
to 654,286 post-reverse split shares of the Company's Common Stock.
Mr. Thomas Tong, who is currently the Company's Acting President and Chief
Financial Officer and a director of the Company, is the sole shareholder of
Great China Industries.
C.P. Investment is a wholly-owned subsidiary of China Pacific Investment
Holdings Ltd. ("China Pacific"). China Pacific is owned 51% by Kiu Yin
Investment Co., Ltd., a company controlled by a discretionary trust established
for the benefit of the family of Clement Shui-Tong Mak, formerly the President,
Chief Executive Officer, and Chairman of the Company. The remaining 49%
interest in China Pacific is owned by Guangdong Construction (BVI) Co., Ltd.,
which is, in turn, wholly owned by the China Construction Bank-Guangdong Branch.
SEE "Certain Relationships and Related Transactions."
The Purchase Price is to be paid with HK$700,000 (equivalent to
US$90,332.58) in cash, which was delivered to C.P. Investment on the closing
date of the transaction, September 14, 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 a two-year term
loan, repayable at maturity, with interest at eight percent per annum, from
Chengdu Row International Limited, a British Virgin Islands corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 29, 1995, the Company entered into an agreement with Open View
Properties Ltd. ("Open View Properties"), which is controlled by The People's
Government of Huiyang City, whereby the Company's then 51%-owned subsidiary,
China Pacific Construction (BVI) Limited ("CPCT"), sold its entire interest in
each of its Project Subsidiaries and along therewith, its entire interest in Sun
City (the "Sun City Sale"). As consideration for the Company's interest in the
Sun City development, Open View Properties delivered a series of three year 8%
promissory notes in the amount of US$16.2 million, representing a return of
CPCT's original capital contributions and loans to the Project Subsidiaries plus
a fee for services to be provided of US$4.1 million. Additionally, the Company
was granted a five year option to develop and market 5 million square meters of
land surrounding Sun City at a price of Rmb100 (US$12) per square meter and a
five year option to repurchase the Company's interest in Sun City at a cost plus
a 10% premium per year. In conjunction with the Sun City Sale, The People's
Government of Huiyang City obtained a 50% interest in CPTC, with the Company
owning the remaining 50%.
As of December 31, 1997, the Company had receivables from Open View
Properties of approximately Rmb33.7 million and an investment of approximately
Rmb59 million in CPCT, whose primary asset consists of the three 8% promissory
notes discussed above. The promissory notes and receivables are due for
settlement in December 1998, and it is unclear whether Open View Properties and
its related companies have the cash resources necessary to pay these obligations
to the Company and to CPCT on the due date.
During 1997, Mr. Xin-Chuan Huang, a member of the Company's Board of
Directors and a Nominee, was the executive director and legal representative of
both China Treasure Property Development Company and China Treasure Industrial
Enterprises, which are subsidiaries of Open View Properties. Upon his
appointment in 1998 as a director of the Company, Mr. Huang resigned from his
positions with China Treasure Property Development Company and China Treasure
Industrial Enterprises.
During 1995, China Treasure Holding (an affiliate of the Company since the
date of the Sun City Sale because Mr. Clement Mak, formerly Chief Executive
Officer, director and shareholder of the Company, holds an indirect ownership
interest of 51% in China Treasure Holding) loaned US$12 million to the Company's
subsidiary,
6
China Pacific Steel Limited ("CPS"), in the form of a non-interest bearing
promissory note which is secured by the stock of CPS. China Treasure Holding
also loaned US$1.3 million to the Company and its subsidiaries at a commercial
interest rate of 9% per annum. There is no balance remaining on these two
loans. As of December 31, 1997, C.P. Investment (which had record ownership of
36.19% of the Company's Common Stock as of that date) had outstanding a
non-interest bearing loan of US$163,000 to the Company.
C.P. Investment held 3,271,429 shares of Common Stock as of December 31,
1997. C.P. Investment is wholly owned by China Pacific Investment Holdings,
which is 51% owned by Kiu Yin Investment Co., Ltd., a company controlled by a
discretionary trust established for the benefit of the family of Clement Mak,
the Company's Chairman and President, and 49% owned by Guangdong Construction
(B.V.I.) Co., Ltd., which is wholly owned by The China Construction
Bank-Guangdong Branch. During 1997, Mr. Jian-Sheng Tan, a member of the
Company's Board of Directors and a Nominee, was the General Manager of the China
Construction Bank - Guangdong Branch. Mr. Tan continues to hold that position.
On September 14, 1998, Great China Industries Limited, a Britsh Virgin
Islands corporation which is wholly owned by Mr. Thomas Long-Tin Tong, acquired
3,271,429 shares of Common Stock held by C.P. Investment. SEE "Significant
Acquisition of the Company's Common Stock."
The Company has no existing corporate policy that prohibits or governs the
terms of any of the transactions discussed above.
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative shareholder
return (change in stock price plus reinvested dividends) of the Company's Common
Stock with the Standard & Poor's Small Cap 600 Index (the "S&P Small Cap Index")
and the Dow Jones Unweighted Steel Index (the "Dow Jones Steel Index").
Although Securities and Exchange Commission regulations generally require the
graph to cover a five-year period, the graph below covers a 43-month period
because the Company's Common Stock has only been traded on the NASDAQ SmallCap
Market since approximately June 20, 1995. The comparisons in the graph are
required by the Securities and Exchange Commission and are not intended to
forecast or to indicate of possible future performance of the Company's Common
Stock.
[CHART]
6/20/95 / 6/13/95 12/29/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------
China Pacific, Inc. $100.00 $46.67 $24.17 $7.47
S&P Small Cap Index $100.00 $114.74 $137.84 $171.65
Dow Jones Steel Index $100.00 $94.41 $80.52 $75.83
The comparison assumes a $100 investment made on June 20, 1995 (the
approximate date the Company's Common Stock was listed on the NASDAQ SmallCap
Market) in the Company's Common Stock and on June 13, 1995 in the securities
comprising the S&P Small Cap Index and the Dow Jones Steel Index.
7
PROPOSAL 2
INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen & Co. SC as independent
auditors for the year ending December 31, 1998, and recommends that the
shareholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection.
Representatives of Arthur Andersen Co. SC are expected to be present at the
Annual Meeting, will be afforded an opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
inquiries from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN & CO. SC AS INDEPENDENT ACCOUNTANTS FOR THE
COMPANY.
PROPOSAL 3
APPROVAL OF THE 1998 STOCK OPTION PLAN
DESCRIPTION OF THE PLAN
The Board of Directors has adopted, subject to shareholder approval, the
1998 Stock Option Plan (the "Plan"). The Plan is intended to encourage
ownership of the Company's Common Stock by selected key employees and directors
of, and consultants to, the Company and its subsidiaries and affiliates an
opportunity to participate in the Company's future by offering them an
opportunity to acquire Common Stock so as to attract, retain, and motivate them.
Options granted under the Plan (the "Options") shall be "Nonqualified Options,"
and shall not include "incentive stock options" intended to qualify for
treatment pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Plan shall be effective on the date that it is
approved by the Company's shareholders.
The Plan permits up to 180,000 shares of Common Stock (after giving effect
to the Company's recent 1 for 5 reverse stock split which was effective
September 28, 1998) to be issued pursuant to Options granted under the Plan.
Shares underlying Options granted under the Plan that are canceled or expire
unexercised become available again for grants under the Plan. As of October 12,
1998, the market value of the 180,000 shares of Common Stock proposed to be made
available for grants of Options under the Plan is $157,500.
The Plan will be administered by the Board of Directors or, upon delegation
by the Board of Directors, by a committee of the Board of Directors consisting
solely of two or more non-employee directors (the "Committee"). The Board of
Directors may at any time abolish the committee and revest in itself the
administration of the Plan. The Committee shall select the key employees,
directors, and consultants to whom options may be granted, determine whether and
to what extent options shall be granted under the Plan, determine the number of
shares to be covered by each Option granted under the Plan, and determine the
terms and conditions of any Option granted under the Plan.
The exercise price of the Options granted pursuant to the Plan shall, in
each case be set by the Committee, but shall be equal to at least 85% of the
fair market value of the underlying shares of Common Stock on the date the
Option is granted.
The duration of each Option shall be fixed by the Committee, but no option
shall be exercisable more than ten years after the date the Option is granted.
The Committee may determine that an Option may be exercised immediately or over
a period to be set by the Committee and whether the Option may be exercised in
whole or in increments.
In the event of a "change in control" of the Company, in the discretion of
the Board of Directors, acceleration and valuation provisions no more favorable
than the following may be applied to outstanding Options: (a) any Options
outstanding as of the date a change in control is determined to have occurred
and not then exercisable and vested shall become fully exercisable and vested;
and (b) the value (net of any exercise price) of all outstanding Options, unless
otherwise determined by the Board of Directors at or after the grant and subject
to Rule 16b-3, promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended, shall be cashed out on the basis of the "change in
control price," as defined below, as of the date such change in control is
determined to have occurred or such other date as the Board of Directors may
determine prior to the change in control.
8
For purposes of the preceding, a "change of control" means the occurrence
of any one of the following: (a) any "person" as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, a subsidiary, an
affiliate, or a Company employee benefit plan) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities representing 20% or more of the combined voting power
of the Company's then outstanding securities; (b) the solicitation of proxies
with respect to the election of any director of the Company where such
solicitation for any candidate who is not a candidate proposed by a majority of
the Board of Directors in office prior to the time of such election; or (c) the
dissolution or liquidation (partial or total) of the Company, or a sale of 30%
or more of the Company's assets, any merger or reorganization of the Company
whether or not another entity is the survivor, a transaction pursuant to which
the holders, as a group, of all shares of the Company's Common Stock prior to
the transaction hold, as a group, less than 70% of the shares outstanding after
the transaction, or any other event which the Board of Directors determines, in
its discretion, would materially alter the structure of the Company or its
ownership.
The "change in control price" means the highest price per share paid in any
transaction reported on the National Market System of the National Association
of the Securities Dealers, Inc. Automated Quotation System or paid or offered in
any bona fide transaction related to a potential or actual change in control of
the Company at any time during the preceding 60-day period as determined by the
Board of Directors.
The Board of Directors may amend, alter, or discontinue the Plan or any
Option at any time, but no amendment, alteration, or discontinuance may be made
which would impair the rights of an optionee under an outstanding Option without
the optionee's consent. No amendment, alteration, or discontinuance of the Plan
shall require shareholder approval except: (a) an increase in the total number
of shares reserved for issuance pursuant to Options under the Plan; (b) to the
extent required by applicable laws, rules, or regulations; or (c) to the extent
that the Board of Directors otherwise concludes that shareholder approval is
advisable.
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based upon
current statutes, regulations, and interpretations thereof, and has been
prepared under the supervision of Heller, Ehrman, White & McAuliffe. This
discussion does not address to what extent, if at all, any provision of the Code
may apply to optionees who are not citizens of the United States, and does not
address state, local, or foreign tax laws that may apply to such persons.
Federal income tax consequences associated with stock options are complex
and vary depending upon an optionee's individual circumstances. Accordingly,
what follows is not a complete description of the federal income tax
consequences of the Plan or transactions therewith.
Under current Treasury Regulations, the nonqualified stock options granted
under the Plan do not have readily ascertainable fair market value at the time
of grant. Thus, the optionee does not recognize income at the time of grant.
The optionee will recognize ordinary income at the time the Option is exercised
to the extent that the fair market value of the shares of Common Stock purchased
exceeds the exercise price for those shares. The optionee's tax basis for the
purchased shares will be their fair market value on the date the Option is
exercised, and the holding period for purposes of determining whether capital
gain or loss upon sale is long or short-term will begin on the date of purchase.
If shares acquired by exercise of an Option are acquired by an officer or
director of the Company or other person subject to Section 16(b) of the Exchange
Act, Section 83 of the Code may delay the time that the optionee has taxable
income due to the exercise of the Option and the time that the holding period of
the shares of Common Stock begins for long-term capital gain or loss purposes.
The amount recognized as ordinary income by an optionee who is an employee
constitutes "supplemental wages" subject to withholding of federal tax by the
Company. The Company may compute the amount to be withheld in accordance with
either of two methods: (1) using a flat 28 percent rate without allowance for
the optionee's withholding exemptions; or (2) treating the amount of ordinary
income as regular wages either for the payroll period in which the ordinary
income was recognized or for the last preceding payroll period. As with other
wages, the Company may deduct the amount of "supplemental wages" related to the
exercise of Options when computing its taxable income if certain reporting
requirements are met.
Upon sale of the purchased shares of Common Stock for which the optionee
was not subject to Section 16(b) of the Exchange Act or for which a valid
Section 83(b) election was made, or after the lapse of the Section 16(b)
restriction, the optionee will recognize capital gain or loss to the extent of
the difference between the sale price of the purchased shares and the optionee's
tax basis in the shares. Capital gain or loss will be long-term if the shares
are held more than one year.
If an optionee uses other shares of the Company's Common Stock to pay all
or part of the Option exercise price, the optionee will not recognize gain or
loss on the previously owned shares. Under applicable rulings and
9
regulations, shares acquired upon exercise of a nonqualified option that are
equal in value to the fair market value of the shares surrendered in payment are
treated as if they had been exchanged for the surrendered shares, taking as
their basis and holding period the basis and holding period that the surrendered
shares had in the optionee's hands. Other tax consequences are as described
above, determined as if the optionee had exercised the option with cash equal to
the fair market value of the surrendered shares.
The approval is being sought to comply with listing requirements imposed by
the Nasdaq Stock Market Inc. Approval of the Plan requires the affirmative vote
of a majority of the total votes cast on the proposal at the meeting, in person
or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL THE COMPANY'S 1998 STOCK OPTION PLAN
OTHER MATTERS
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended December 31,
1997, containing the audited consolidated balance sheets as of December 31, 1997
and December 31, 1996 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the past three fiscal years, is
being mailed with this Proxy Statement to shareholders entitled to notice of the
Annual Meeting.
The Board knows of no other matters that will be presented at the Annual
Meeting. If, however, any matter is properly presented at the Annual Meeting,
the proxy solicited hereby will be voted in accordance with the judgment of the
proxyholders.
By Order of the Board of Directors
Albert Choi
Secretary
October 20, 1998
10
CHINA PACIFIC, INC.
STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS.
(a) PURPOSE. The purpose of the Plan is to provide selected eligible key
employees and directors of, and consultants to, China Pacific, Inc. (the
"Company"), a Nevada corporation, and its subsidiaries and affiliates, an
opportunity to participate in the Company's future by offering them an
opportunity to acquire stock in the Company so as to retain, attract and
motivate them. The Plan provides for the grant of Options to purchase Shares.
Options granted hereunder shall be "Nonstatutory Options," and shall not include
"incentive stock options" intended to qualify for treatment under Sections 421
and 422 of the Internal Revenue Code of 1986, as amended.
(b) DEFINITIONS. For purposes of the Plan, the following terms have the
following meanings:
(i) "AFFILIATE" means a parent or subsidiary corporation as
defined in the applicable provisions (currently, Sections 424(e) and (f),
respectively) of the Code.
(ii) "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
(iii) "CHANGE IN CONTROL" has the meaning set forth in Section 6(a).
(iv) "CHANGE IN CONTROL PRICE" has the meaning set forth in Section
6(c).
(v) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.
(vi) "COMMISSION" means the Securities and Exchange Commission and
any successor agency.
(vii) "COMMITTEE" means the Committee referred to in Section 2, or
the Board in its capacity as administrator of the Plan in accordance with
Section 2.
(viii) "COMPANY" means China Pacific, Inc., a Nevada corporation.
(ix) "DISABILITY" means permanent and total disability as
determined by the Committee for purposes of the Plan, in accordance with the
standards set forth in Section 22(e)(3) of the Code.
(x) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
(xi) "EXPIRATION DATE" means the last day of the term of an Option
established under Section 5 of the Plan.
(xii) "FAIR MARKET VALUE" means as of any given date (a) if the
Stock is listed on any established stock exchange or a national market system,
the closing sales price for the Stock or the closing bid if no sales were
reported, as quoted on such system or exchange, as reported in the WALL STREET
JOURNAL; or (b) in the absence of an established market for the Stock, the fair
market value of the Stock as determined by the Committee in good faith.
(xiii) "NONSTATUTORY OPTION" means any Option that is not an
incentive stock option.
(xiv) "OPTION" means a stock option granted pursuant to the Plan.
Each Option shall be a Nonstatutory Option not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(xv) "OPTION AGREEMENT" means the written agreement evidencing the
grant of an Option to an Optionee and containing the terms, conditions and
restrictions pertaining to such Option.
(xvi) "OPTIONEE" means the selected eligible key employees and
directors of, and consultants to, the Company who holds an Option.
(xvii) "PLAN" means this China Pacific, Inc. Stock Option Plan, as
amended from time to time.
(xviii) "RULE 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act, as amended from time to time, and any successor rule.
(xix) "SHARES" means the shares of common stock of the Company
subject to an Option granted under the Plan.
(xx) "STOCK" means the common stock of the Company, and any
successor security.
(xxi) "SUBSIDIARY" has the meaning set forth in Section 424(f) of
the Code.
(xxii) "TAX DATE" means the date defined in Section 7(f).
2
(xxiii) "TERMINATION" means, for purposes of the Plan, with respect
to an Optionee, that the Optionee has ceased to be, for any reason, employed by,
consulting to, or a director of, the Company, a subsidiary or an affiliate;
PROVIDED, that for purposes of this definition, if so determined by the
President of the Company, in his sole discretion, Termination shall not include
a change in status from an employee of, to a consultant to or director of, the
Company or any subsidiary or affiliate, or vice versa.
SECTION 2. ADMINISTRATION.
(a) COMMITTEE. The Plan shall be administered by the Board or, upon
delegation by the Board, by a committee of the Board (consisting solely of two
or more non-employee directors as such term is defined in Rule 16b-3(b)(3)(i) of
the Exchange Act and Treas. Reg. 1.162-27(c)(3)(i) under the Code), appointed by
the Board that will satisfy Rule 16b-3 and Section 162(m) of the Code, as in
effect with respect to the Company from time to time. In connection with the
administration of the Plan, the Committee shall have the powers possessed by the
Board. The Committee may act only by a majority of its members, except that the
Committee may from time to time select another committee or one or more other
persons to be responsible for any matters so long as such selection comports
with the requirements of Rule 16b-3 and Section 162(m) of the Code. The Board
at any time may abolish the Committee and revest in the Board the administration
of the Plan.
(b) AUTHORITY. The Committee shall grant Options to eligible key
employees and directors of, and consultants to, the Company. In particular and
without limitation, the Committee, subject to the terms of the Plan, shall:
(i) select the directors, key employees and consultants to whom
Options may be granted;
(ii) determine whether and to what extent Options are to be granted
under the Plan;
(iii) determine the number of shares to be covered by each Option
granted under the Plan; and
(iv) determine the terms and conditions of any Option granted under
the Plan.
(c) COMMITTEE DETERMINATIONS BINDING. The Committee may adopt, alter and
repeal administrative rules, guidelines and practices governing the Plan as it
from time to time shall deem advisable, may interpret the terms and provisions
of the Plan, any Option and any Option Agreement and may otherwise supervise the
3
administration of the Plan. Any determination made by the Committee pursuant to
the provisions of the Plan with respect to any Option shall be made in its sole
discretion at the time of the grant of the Option or, unless in contravention of
any express term of the Plan or Option, at any later time. All decisions made
by the Committee under the Plan shall be binding on all persons, including the
Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
(a) NUMBER OF SHARES. The total number of shares of Stock reserved and
available for issuance pursuant to Options under the Plan shall be 180,000
shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares or shares reacquired in private transactions
or open market purchases, but all shares issued under the Plan, regardless of
source shall be counted against the 180,000 share limitation. If any Option
terminates or expires without being exercised in full, the shares issuable under
such Option shall again be available for issuance in connection with other
Options. If shares of common stock of the Company issued pursuant to an Option
are repurchased by the Company, such common stock shall not again be available
for issuance in connection with Options. To the extent the number of shares of
common stock of the Company issued pursuant to an Option is reduced to satisfy
withholding tax obligations, the number of shares withheld to satisfy the
withholding tax obligations shall not be available for later grant under the
Plan. Any Option under the Plan shall be governed by the terms of the Plan and
any applicable Option Agreement.
(b) ADJUSTMENTS. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or other change in
corporate structure affecting the Stock, such substitution or adjustments shall
be made in the aggregate number of shares of Stock reserved for issuance under
the Plan, in the number and exercise price of shares subject to outstanding
Options, as may be determined to be appropriate by the Committee, in its sole
discretion; PROVIDED, however, that the number of shares subject to any Option
shall always be a whole number.
SECTION 4. ELIGIBILITY.
Options may be granted to directors and key employees of, and consultants
to, the Company, its subsidiaries and affiliates.
4
SECTION 5. STOCK OPTIONS.
(a) TYPES. Any Option granted under the Plan shall be in such form as the
Committee may from time to time approve. The Committee shall have the authority
to grant to any eligible individual, Nonstatutory Stock Options.
(b) TERMS AND CONDITIONS. Options granted under the Plan shall be subject
to the following terms and conditions:
(i) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten (10) years after the
date the Option is granted.
(ii) GRANT DATE. The Company may grant Options under the Plan at
any time and from time to time before the Plan terminates. The Committee shall
specify the date of grant or, if it fails to, the date of grant shall be the
date of action taken by the Committee to grant the Option. However, if an
Option is approved in anticipation of employment, the date of grant shall be the
date the intended Optionee is first treated as an employee for payroll purposes.
(iii) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be equal to at least 85% of the Fair Market
Value on the date of grant.
(iv) EXERCISABILITY. Subject to the other provisions of the Plan,
an Option shall be exercisable in its entirety at grant. The Committee, in its
absolute discretion, at any time may waive any limitations respecting the time
at which an Option first becomes exercisable in whole or in part.
(v) METHOD OF EXERCISE; PAYMENT. To the extent the right to
purchase shares has accrued, Options may be exercised, in whole or in part, from
time to time, by written notice from the Optionee to the Company stating the
number of shares being purchased, accompanied by payment of the exercise price
for the shares.
SECTION 6. CHANGE IN CONTROL.
(a) DEFINITION OF "CHANGE IN CONTROL". For purposes of Section 6(b), a
"Change in Control" means the occurrence of any one of the following:
(i) Any "person", as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, a subsidiary, an affiliate, or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act),
5
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities;
(ii) the solicitation of proxies (within the meaning of
Rule 14a-1(l)(1) under the Exchange Act and any successor rule) with respect to
the election of any director of the Company where such solicitation is for any
candidate who is not a candidate proposed by a majority of the Board in office
prior to the time of such election; or
(iii) the dissolution or liquidation (partial or total) of the
Company or a sale of assets involving 30% or more of the assets of the Company,
any merger or reorganization of the Company whether or not another entity is the
survivor, a transaction pursuant to which the holders, as a group, of all of the
shares of the Company outstanding prior to the transaction hold, as a group,
less than 70% of the shares of the Company outstanding after the transaction, or
any other event which the Board determines, in its discretion, would materially
alter the structure of the Company or its ownership.
(b) IMPACT OF EVENT. In the event of a "Change in Control" as defined in
Section 6(a), but only if and to the extent so specifically determined by the
Board in its discretion, which determination may be amended or reversed only by
the affirmative vote of a majority of the persons who were directors at the time
such determination was made, acceleration and valuation provisions no more
favorable to participants than the following may apply:
(i) Any Options outstanding as of the date such Change in Control
is determined to have occurred and not then exercisable and vested shall become
fully exercisable and vested.
(ii) The value (net of any exercise price) of all outstanding
Options, unless otherwise determined by the Committee at or after grant and
subject to Rule 16b-3, shall be cashed out on the basis of the "Change in
Control Price", as defined in Section 6(c), as of the date such Change in
Control is determined to have occurred or such other date as the Board may
determine prior to the Change in Control.
(c) CHANGE IN CONTROL PRICE. For purposes of this Section 6, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of the Company at
any time during the preceding 60-day period as determined by the Board.
6
SECTION 7. GENERAL PROVISIONS.
(a) OPTION GRANTS. Subject to the terms and restrictions set forth
elsewhere in the Plan, the Committee shall determine the number of Shares
offered to each Optionee and in addition to those set forth in the Plan, any
other terms and conditions of the Option. The Committee may condition the grant
of any Option upon the attainment of specified performance goals or such other
factors or criteria, including vesting based on continued employment or
consulting, as the Committee shall determine. Performance objectives may vary
from eligible party to eligible party and among groups of eligible parties and
shall be based upon such Company, subsidiary, group or division factors or
criteria as the Committee may deem appropriate, including, but not limited to,
earnings per share or return on equity. The Committee may also substitute new
Options for previously granted Options, including previously granted Options
having higher exercise prices.
(b) OPTION AGREEMENT. As soon as practicable after the date of the
granting of an Option, the Company and the Optionee shall enter into a written
Option Agreement identifying the date of grant, and specifying the terms and
conditions of the Option. Options are not exercisable until after execution of
the Option agreement by the Company and the Optionee, but a delay in execution
of the agreement shall not affect the validity of the Option grant.
(c) CERTIFICATES. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem advisable under
the rules, regulations and other requirements of the Commission, any market in
which the Stock is then traded and any applicable federal, state or foreign
securities law.
(d) TERMINATION. Unless otherwise provided in the applicable Option
Agreement or by the Committee, in the event of Termination for any reason other
than death, retirement or Disability, Options held at the date of Termination
(and only to the extent then exercisable or payable, as the case may be) may be
exercised in whole or in part at any time within three (3) months after the date
of Termination, or such lesser period specified in the Option Agreement (but in
no event after the expiration date of the Option), but not thereafter. If
Termination is due to retirement or to death or Disability, Options held at the
date of Termination (and only to the extent then exercisable or payable, as the
case may be) may be exercised in whole or in part by the Optionee in the case of
retirement or Disability, by the Optionee's guardian or legal representative or
by the person to whom the Option is transferred by will or the laws of descent
and distribution, at any time within two (2) years from the date of Termination
or any lesser period specified in the Option Agreement (but in no event after
the expiration of the Option).
7
(e) DELIVERY OF PURCHASE PRICE. If and only to the extent authorized by
the Committee, participants may make all or any portion of any payment due to
the Company
(i) upon exercise of an Option, or
(ii) with respect to federal, state, local or foreign tax payable
in connection exercise of an Option, by delivery of (x) cash, (y) check, or
(z) any property other than cash (including a promissory note of the participant
or shares of Stock or securities) so long as, if applicable, such property
constitutes valid consideration for the Stock under, and otherwise complies
with, applicable law. No promissory note under the Plan shall have a term
(including extensions) of more than five years or shall be of a principal amount
exceeding 90% of the purchase price paid by the borrower. Exercise of an Option
may be made pursuant to a "cashless exercise/sale" procedure pursuant to which
funds to pay for exercise of the Option are delivered to the Company by a broker
upon receipt of stock certificates from the Company, or pursuant to which
Optionees obtain margin loans from brokers to fund the exercise of the Option.
(f) TAX WITHHOLDING. The Optionee shall pay to the Company in cash,
promptly upon exercise of an Option or, if later, the date that the amount of
such obligations becomes determinable (in either case, the "Tax Date"), all
applicable federal, state, local and foreign withholding taxes that the
Committee, in its discretion, determines to result upon exercise of an Option or
from a transfer or other disposition of shares of common stock of the Company
acquired upon exercise of an Option or otherwise related to an Option or shares
of common stock of the Company acquired in connection with an Option.
A person who has exercised an Option may make an election (i) to
deliver to the Company a promissory note of the Optionee on the terms set forth
in Section 7(e); (ii) to tender to the Company previously-owned shares of common
stock of the Company; or (iii) to have shares of common stock of the Company to
be obtained upon exercise of the Option withheld by the Company on behalf of the
Optionee, to pay the amount of tax that the Committee, in its discretion,
determines to be required to be withheld by the Company.
Any shares tendered to or withheld by the Company will be valued at
Fair Market Value on such date. The value of the shares of common stock of the
Company tendered or withheld may not exceed the required federal, state, local
and foreign withholding tax obligations as computed by the Company.
(g) NO TRANSFERABILITY. No Option shall be assignable or otherwise
transferable by the Optionee other than by will or by the laws of descent and
distribution. During the life of a Optionee, an Option shall be exercisable,
and any
8
elections with respect to an Option may be made, only by the Optionee or
Optionee's guardian or legal representative.
(h) NON-COMPETITION. The Committee may condition its discretionary waiver
of a forfeiture, the acceleration of vesting at the time of Termination of an
Optionee holding any unexercised Option, the waiver of restrictions on any
Option, or the extension of the expiration period to a period not longer than
that provided by the Plan upon such Optionee's agreement (and compliance with
such agreement) to (i) not engage in any business or activity competitive with
any business or activity conducted by the Company; and (ii) be available for
consultations at the request of the Company's management, all on such terms and
conditions (including conditions in addition to (i) and (ii)) as the Committee
may determine.
(i) REGULATORY COMPLIANCE. Each Option under the Plan shall be subject to
the condition that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock upon any
securities exchange or for trading in any securities market or under any state
or federal law; (ii) the consent or approval of any government or regulatory
body; or (iii) an agreement by the Optionee with respect thereto, is necessary
or desirable, then such Option shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
(j) RIGHTS AS SHAREHOLDER. Unless the Plan or the Committee expressly
specifies otherwise, an Optionee shall have no rights as a shareholder with
respect to any shares covered by an Option until the stock certificates
representing the shares are actually delivered to the Optionee. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date the certificates are delivered.
(k) BENEFICIARY DESIGNATION. The Committee, in its discretion, may
establish procedures for an Optionee to designate a beneficiary to whom any
amounts payable in the event of the Optionee's death are to be paid.
(l) ADDITIONAL PLANS. Nothing contained in the Plan shall prevent the
Company, a subsidiary or an affiliate from adopting other or additional
compensation arrangements for its directors, key employees and consultants.
(m) NO EMPLOYMENT RIGHTS. The adoption of the Plan shall not confer upon
any employee any right to continued employment nor shall it interfere in any way
with the right of the Company, a subsidiary or an affiliate to terminate the
employment of any employee at any time.
(n) RULE 16b-3. Notwithstanding any provision of the Plan, the Plan shall
always be administered, and Options shall always be granted and exercised, in
such a
9
manner as to conform to the provisions of Rule 16b-3. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with the applicable conditions of Rule 16b-3 under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be adjusted to comply with Rule 16b-3, to
the extent permitted by law and deemed advisable by the Committee. It shall be
the responsibility of persons subject to Section 16 of the Exchange Act, not of
the Company or the Committee, to comply with the requirements of Section 16 of
the Exchange Act; and neither the Company nor the Committee shall be liable if
the Plan or any transaction under the Plan fails to comply with the applicable
conditions of Rule 16b-3, or if any such person incurs any liability under
Section 16 of the Exchange Act.
(o) GOVERNING LAW. The Plan and all Options shall be governed by and
construed in accordance with the laws of the State of California.
(p) USE OF PROCEEDS. All cash proceeds to the Company under the Plan
shall constitute general funds of the Company.
(q) UNFUNDED STATUS OF PLAN. The Plan shall constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or arrangements to meet the obligations created under the
Plan to deliver Stock or make payments; PROVIDED, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
(r) ASSUMPTION BY SUCCESSOR. The obligations of the Company under the
Plan and under any outstanding Option may be assumed by any successor
corporation, which for purposes of the Plan shall be included within the meaning
of "Company".
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan or any Option, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of an Optionee under an outstanding Option without the Optionee's
consent. No amendment, alteration or discontinuance shall require shareholder
approval except (a) an increase in the total number of shares reserved for
issuance pursuant to Options under the Plan; (b) to the extent required by
other applicable laws, rules or regulations; or (c) to the extent that the Board
otherwise concludes that shareholder approval is advisable.
10
SECTION 9. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by the Company's
shareholders.
SECTION 10. TERM OF PLAN.
No Option shall be granted on or after [ Date ], but Options granted prior
to [Date] may extend beyond that date.
11
CHINA PACIFIC, INC.
ANNUAL MEETING OF SHAREHOLDERS -- NOVEMBER 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of China Pacific, Inc. (the "Company") hereby
appoints Thomas Long-Tin Tong as the nominee of the undersigned to amend and to
act for and on behalf of the undersigned at the annual meeting of shareholders
of the Company to be held on November 11, 1998 at 10:00 a.m. Pacific Daylight
Time (for holders of shares as of September 24, 1998), and at any adjournment or
adjournments thereof, to the same extent and with the same power as if the
undersigned were personally present at said meeting or such adjournment or
adjournments thereof and, without limiting the generality of the power hereby
conferred, the nominees named above are specifically directed to vote as
indicated below.
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for each nominee listed below
Thomas Long-Tin Tong, Chun-Hing Lo, Xin-Chuan Huang, Jian-Sheng Tan
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE NAMES OF SUCH NOMINEE(S) BELOW).
--------------------------------------------------------------------------------------------------------------------
2. PROPOSAL BY CHINA PACIFIC, INC. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S INDEPENDENT
CERTIFYING ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL BY CHINA PACIFIC, INC. TO APPROVE THE COMPANY'S 1998 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE SIGN AND DATE ON REVERSE SIDE)
This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. WHEN NO CHOICE IS INDICATED, THIS PROXY WILL BE VOTED
FOR THE NOMINEES OR PROPOSALS LISTED ABOVE. The undersigned hereby appoint(s)
the proxyholders to vote as designated on this proxy, and, in their discretion,
to vote upon such other business as may properly come before the meeting or any
adjournment thereof.
Dated: ____________, 1998
_________________________
Signature
____________________________
Signature if held jointly
Please sign and date exactly
as name(s) appear(s) hereon.
When shares are held by
joint tenants, both should
sign. When signing as an
attorney, as executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.