**Exhibit 10.12**

 

Translationof $4.5 million loan between Lotus and TCL

 

Controlnumber:

 

Agreementof Internal loans of TCL Industries Holdings (Hong Kong)

 

Debitor (“PartyA)”): Lotus Pacific, Inc.

Creditor(“Party B”): TCL Industries Holdings (Hong Kong) Ltd.

 

Party A,for its business needs, intends to apply a loan from Party B, which agrees tomake such a loan. The both parties agree to reach the flowing agreements basedon mutual consents and governing laws and regulations:

 

1.     Loan type: Short term loan.

 

2.     Loan amount:  Four million five hundred thousand US dollars.

 

3.     Purpose of the loan:  To satisfy the needs of the businessexpansion of the subsidiaries.

 

4.     Loan terms: Three months between 10/22/2003 and 1/22/2004. If the beginning date ofthe loan on any subsequent amendment(s) to renew this loan is different fromthis original date, the beginning date on this agreement should used for thepurpose of calculation. Any subsequent extensions of this loan shall be a partto this agreement and shall have the same binding force.

 

5.     Interest Loan interest rate, calculation ofinterest

(1) Themonthly interest rate shall be 0.257%.

(2)Interest shall be calculated monthly and calculated on every 20th ofthe month. Daily interest rate shall be monthly rate divided by 30.

(3) Anyadjustment of interest rate before the maturity of the loan shall be based onthe bank regulation on interest rate.

 

6.     Condition of releasing the loan to debitor

(1) PartyA properly completed the registration process and satisfied all the legaldocuments for the loan to be released;

(2) If theloan requires collateral, all the conditions are satisfied by Party A or thethird party.

(3) PartyA has not breached any clause that required by for this loan.

 

7.     Payment of interest and principal

(1) PartyA shall pay interest on the interest calculation day. First payment is the dayafter the first calculation day of the month, and last payment shall be madetogether with the principal when the loan matures.

(2) PartyA agrees to accrue sufficient amount to pay interest when due, and remit theinterest payment to Party B’s designated bank account.

(3) PartyA shall reserve sufficient amount in its bank account when the loan matures inorder to payback the principal amount of the loan.

(4) IfParty A fails to payback the loan amount when the loan matures, Party B has theright to dispose the collateral at its discretion or seek legal venue toresolve the issue.

 

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8.     Collateral

Thecollateral required for this loan is the number 3 in the following list;

(1)          Guarantee;

(2)          Collateral;

(3)          Collateral with physical assets; (X) (Lotus equityinterest in Correlant Communications.)

(4)          Letter of credit;

(5)          Counter guarantee;

(6)          Letter of promissory notes;

(7)          Others 

 

9.     The main rights and liabilities of bothparties

(1) Therights and liabilities of Party A:

(A) Therights of Party A

(a) PartyA has the right to ask Party B to release the loan;

(b) PartyA has the right to use the loan under the terms of the loan agreement;

(c) PartyA has the right to ask Party B for extension(s) of the loan with the consent ofParty B;

(d) PartyA has the right to ask Party B to keep the confidentiality of all theinformation regarding its accounting and business operation, except otherwisegoverned by the laws and regulations

(B) Theliabilities of Party A

(a) PartyA shall pay back the principal and interest when the loan matures;

(b) PartyA shall use the loan in accordance with the terms of the agreement, and not usethe loan for other purpose without written consent from Party B;

(c) PartyA shall provide Party B with all the information include but not limitedaccounting, statistics, business planning and KPI, etc. when requested by PartyB.

(d)Without payback the loan amount, Party A shall not use the loan amount ascollateral to secure another loan;

(e) IfParty A will provide guarantee to other parties before the loan is matured,Party A must notice Party B and receives consent from Party B;

(f) PartyA shall provide Party B with additional collateral if the value of thecollateral used for this loan is less that the original stated amount asrequired by the agreement;

(g) PartyA must notify Party B for any changes made to its name, legal person, businessregistration, registered capital, etc.

(h) PartyA must notice Party B within 10 days for any of the following that may affectParty B to exercise its right as a creditor: contract, joint venture, merge,acquisition, spin-off, apply for close of business, apply for bankruptcy, etc.

(i) PartyA shall immediately notify Party B for any of the following: closedown ofbusiness operation, revoke of business license, revoked of businessregistration, any involvement of legal person in illegal activities, becomes aparty to legal action, severe deterioration of financial conditions, andresolve the payment of the loan and collateral under the conditions of Party B;

 

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(2) Rightsand liabilities of Party B

(A) The rightsof Party B

(a) PartyB has the rights to get access to the information regarding Party A’s financialand business operation, has the right to ask Party A to provide all theinformation include but not limited to its planning, accounting and KPI data;

(b) PartyB has the right to audit Party A on the use of the loan.

(B) Theliabilities of Party B

(a) PartyB shall release the loan amount to Party A once the agreement is effective,unless for the reasons caused by Party A;

(b) PartyB agrees to keep all the information provided by Party A confidential unlessotherwise mandated by laws and regulations.

 

10.      Change and termination of the loanagreement

(1) Theagreement may be revised, amended or terminated with the written agreement byboth parties. Any changes made shall become part of the whole agreement. If anyprovision of this agreement is held invalid and void, the balance of theprovisions will remain in full force and effect.

(2) IfParty A plans to transfer its rights and liabilities to the third party, itmust get a written consent from Party B, and transfer will not be valid unlessthe third party sign the new loan agreement with Party B;

(3) PartyA must give a 30 day notice to Party for any of the following actions:contract, leasing, merge and acquisition, joint venture, joint corporation,ownership change etc. Party A shall not take any actions unless it receives awritten consent from Party B;

(4) PartyA agrees to continue to bear the responsible for the liabilities of the loaneven though it has joint venture, joint corporation or equity merge, in whichParty A has equity interest.

 

11.Breach of agreement

(1) IfParty A fails to payback the principal when the loan agreement at the maturitydate, Party B has the right accrue the interest at the daily rate of 2.1/10000.

(2) IfParty A fails to pay interest, Party B has the right to accrue the interest atthe daily rate of 2.1/10000. If Party A pays back the principal amount butfails to the accrued the interest, Party B has the right to continue to accruethe interest on the unpaid amount of interest at a daily compound rate of2.1/10000.

(3) IfParty A uses the loan for the purposes other than stated in the loan agreement,Party B has the right to charge a penalty for the breached amount at the dailyrate of 5/10000.

(4) At anytime before the loan agreement matures, Party B has the right to stop releasingthe loan, take back the loan and interest that were release to Party A, ordeduct directly from Party A’s account if Party A:

(a) failsto pay back principal or interest;

(b) usethe loan for other purpose;

(c)provide false information to Party B;

(d)breaches part of the loan agreement;

(e) isinvolved in law suites or litigations that substantially affect Party A’s

 

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business;

(f)deterioration of Party A’s financial situation;

(g) facesany of the following situations: depreciation, damage, loss, frozen of thecollateral and fails to provide new collateral;

(h) Anyactions by Party A that affect its ability to payback the loan principal andinterest.

 

12. Settlementof dispute

Bothparties shall consult with each other for any disputes regarding the loanagreement; unresolved disputes shall be arbitrated by the management of TCLCorporation. During the period of dispute, the balance of the agreement shallbe in full force.

 

13.Others

(1) Anyother issues that are included the loan agreement but pertinent to theagreement, both parties shall follow the laws, rules and regulations of thegovernment;

(2) Theloan agreement shall be effective once it is properly signed by the legalpersons of the two parties. The agreement will be terminated once all theprincipal and interest are fully paid.

(3) Thisagreement will be executed in counterpart copies and each and all of which willbe deemed an original.

 

14.Special clause

(1) PartyA acknowledges that Party B fully consulted with Party A for all the provisionsin the loan agreement.

(2) PartyA acknowledges that it has full comprehension of all the provisions of the loanagreement, and Party B gives all the explanations to Party A for any and all ofthe questions that Party A has.

(3) Bothparties consent that they have no disagreement over the provisions of theagreement.

 

 
|   | Party A:  Legal person  or authorized signer: | /s/Vincent Yan, President &  CEO |   |
|--------|---------------------------------------------------------|--------------------------------------|--------|
|   |                                                    |                                 |
|   | Dated: October 21, 2003                                 |                                 |
|   |                                                    |                                 |
|   |                                                    |                                 |
|   | Party B: Legal person or  authorized signer:            | /s/ Lu Zhongli, Director             |   |
|   |                                                    |                                 |
|   | Dated: October 21, 2003                                 |                                 |
|        |                                                         |                                      |        |  |

 

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Translationof $4.5 million loan between Lotus and TCL

 

Controlnumber:

 

Agreementof Internal loans of TCL Industries Holdings (Hong Kong)

 

Debitor (“PartyA)”): Lotus Pacific, Inc.

Creditor(“Party B”): TCL Industries Holdings (Hong Kong) Ltd.

 

Party A,for its business needs, intends to apply a loan from Party B, which agrees tomake such a loan. The both parties agree to reach the flowing agreements basedon mutual consents and governing laws and regulations:

 

1.     Loan type: Short term loan.

 

2.     Loan amount:  Four million five hundred thousand US dollars.

 

3.     Purpose of the loan:  To satisfy the needs of the businessexpansion of the subsidiaries.

 

4.     Loan terms: Six months between 1/22/2004 and 10/21/2004. If the beginning date ofthe loan on any subsequent amendment(s) to renew this loan is different fromthis original date, the beginning date on this agreement should used for thepurpose of calculation. Any subsequent extensions of this loan shall be a partto this agreement and shall have the same binding force.

 

5.     Interest Loan interest rate, calculation ofinterest

(1) Themonthly interest rate shall be 0.257%.

(2)Interest shall be calculated monthly and calculated on every 20th ofthe month. Daily interest rate shall be monthly rate divided by 30.

(3) Anyadjustment of interest rate before the maturity of the loan shall be based onthe bank regulation on interest rate.

 

6.     Condition of releasing the loan to debitor

(1) PartyA properly completed the registration process and satisfied all the legal documentsfor the loan to be released;

(2) If theloan requires collateral, all the conditions are satisfied by Party A or thethird party.

(3) PartyA has not breached any clause that required by for this loan.

 

7.     Payment of interest and principal

(1) PartyA shall pay interest on the interest calculation day. First payment is the dayafter the first calculation day of the month, and last payment shall be madetogether with the principal when the loan matures.

(2) PartyA agrees to accrue sufficient amount to pay interest when due, and remit theinterest payment to Party B’s designated bank account.

(3) PartyA shall reserve sufficient amount in its bank account when the loan matures inorder to payback the principal amount of the loan.

(4) IfParty A fails to payback the loan amount when the loan matures, Party B has theright to dispose the collateral at its discretion or seek legal venue toresolve the issue.

 

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8.     Collateral

Thecollateral required for this loan is the number 3 in the following list;

(1)          Guarantee;

(2)          Collateral;

(3)          Collateral with physical assets; (X) (Lotus equityinterest in Correlant Communications.)

(4)          Letter of credit;

(5)          Counter guarantee;

(6)          Letter of promissory notes;

(7)          Others 

 

9.     The main rights and liabilities of bothparties

(1) Therights and liabilities of Party A:

(A) Therights of Party A

(a) PartyA has the right to ask Party B to release the loan;

(b) PartyA has the right to use the loan under the terms of the loan agreement;

(c) PartyA has the right to ask Party B for extension(s) of the loan with the consent ofParty B;

(d) PartyA has the right to ask Party B to keep the confidentiality of all theinformation regarding its accounting and business operation, except otherwisegoverned by the laws and regulations

(B) Theliabilities of Party A

(a) PartyA shall pay back the principal and interest when the loan matures;

(b) PartyA shall use the loan in accordance with the terms of the agreement, and not usethe loan for other purpose without written consent from Party B;

(c) PartyA shall provide Party B with all the information include but not limitedaccounting, statistics, business planning and KPI, etc. when requested by PartyB.

(d)Without payback the loan amount, Party A shall not use the loan amount ascollateral to secure another loan;

(e) IfParty A will provide guarantee to other parties before the loan is matured,Party A must notice Party B and receives consent from Party B;

(f) PartyA shall provide Party B with additional collateral if the value of thecollateral used for this loan is less that the original stated amount asrequired by the agreement;

(g) PartyA must notify Party B for any changes made to its name, legal person, businessregistration, registered capital, etc.

(h) PartyA must notice Party B within 10 days for any of the following that may affectParty B to exercise its right as a creditor: contract, joint venture, merge,acquisition, spin-off, apply for close of business, apply for bankruptcy, etc.

(i) PartyA shall immediately notify Party B for any of the following: closedown ofbusiness operation, revoke of business license, revoked of businessregistration, any involvement of legal person in illegal activities, becomes aparty to legal action, severe deterioration of financial conditions, andresolve the payment of the loan and collateral under the conditions of Party B;

 

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(2) Rightsand liabilities of Party B

(A) Therights of Party B

(a) PartyB has the rights to get access to the information regarding Party A’s financialand business operation, has the right to ask Party A to provide all theinformation include but not limited to its planning, accounting and KPI data;

(b) PartyB has the right to audit Party A on the use of the loan.

(B) Theliabilities of Party B

(a) PartyB shall release the loan amount to Party A once the agreement is effective,unless for the reasons caused by Party A;

(b) PartyB agrees to keep all the information provided by Party A confidential unlessotherwise mandated by laws and regulations.

 

10.      Change and termination of the loanagreement

(1) Theagreement may be revised, amended or terminated with the written agreement byboth parties. Any changes made shall become part of the whole agreement. If anyprovision of this agreement is held invalid and void, the balance of theprovisions will remain in full force and effect.

(2) IfParty A plans to transfer its rights and liabilities to the third party, itmust get a written consent from Party B, and transfer will not be valid unlessthe third party sign the new loan agreement with Party B;

(3) PartyA must give a 30 day notice to Party for any of the following actions:contract, leasing, merge and acquisition, joint venture, joint corporation,ownership change etc. Party A shall not take any actions unless it receives awritten consent from Party B;

(4) PartyA agrees to continue to bear the responsible for the liabilities of the loaneven though it has joint venture, joint corporation or equity merge, in whichParty A has equity interest.

 

11.Breach of agreement

(1) IfParty A fails to payback the principal when the loan agreement at the maturitydate, Party B has the right accrue the interest at the daily rate of 2.1/10000.

(2) IfParty A fails to pay interest, Party B has the right to accrue the interest atthe daily rate of 2.1/10000. If Party A pays back the principal amount butfails to the accrued the interest, Party B has the right to continue to accruethe interest on the unpaid amount of interest at a daily compound rate of2.1/10000.

(3) IfParty A uses the loan for the purposes other than stated in the loan agreement,Party B has the right to charge a penalty for the breached amount at the dailyrate of 5/10000.

(4) At anytime before the loan agreement matures, Party B has the right to stop releasingthe loan, take back the loan and interest that were release to Party A, ordeduct directly from Party A’s account if Party A:

(a) failsto pay back principal or interest;

(b) usethe loan for other purpose;

(c)provide false information to Party B;

(d)breaches part of the loan agreement;

(e) isinvolved in law suites or litigations that substantially affect Party A’s

 

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business;

(f)deterioration of Party A’s financial situation;

(g) facesany of the following situations: depreciation, damage, loss, frozen of thecollateral and fails to provide new collateral;

(h) Anyactions by Party A that affect its ability to payback the loan principal andinterest.

 

12. Settlementof dispute

Bothparties shall consult with each other for any disputes regarding the loanagreement; unresolved disputes shall be arbitrated by the management of TCLCorporation. During the period of dispute, the balance of the agreement shallbe in full force.

 

13.Others

(1) Anyother issues that are included the loan agreement but pertinent to theagreement, both parties shall follow the laws, rules and regulations of thegovernment;

(2) The loanagreement shall be effective once it is properly signed by the legal persons ofthe two parties. The agreement will be terminated once all the principal andinterest are fully paid.

(3) Thisagreement will be executed in counterpart copies and each and all of which willbe deemed an original.

 

14.Special clause

(1) PartyA acknowledges that Party B fully consulted with Party A for all the provisionsin the loan agreement.

(2) PartyA acknowledges that it has full comprehension of all the provisions of the loanagreement, and Party B gives all the explanations to Party A for any and all ofthe questions that Party A has.

(3) Bothparties consent that they have no disagreement over the provisions of theagreement.

 

 
|   | Party A:  Legal  person or authorized signer: | /s/Vincent Yan, President &  CEO |   |
|--------|---------------------------------------------------------|--------------------------------------|--------|
|   |                                                    |                                 |
|   | Dated: February 11, 2004                                |                                 |
|   |                                                    |                                 |
|   | Party B: Legal person or  authorized signer:            | /s/ Lu Zhongli, Director             |   |
|   |                                                    |                                 |
|   | Dated: February 11, 2004                                |                                 |
|        |                                                         |                                      |        |  |

 

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Translationof $4.5 million loan between Lotus and TCL

 

Controlnumber:

 

Agreementof Internal loans of TCL Industries Holdings (Hong Kong)

 

Debitor (“PartyA)”): Lotus Pacific, Inc.

Creditor(“Party B”): TCL Industries Holdings (Hong Kong) Ltd.

 

Party A,for its business needs, intends to apply a loan from Party B, which agrees tomake such a loan. The both parties agree to reach the flowing agreements basedon mutual consents and governing laws and regulations:

 

1.     Loan type: Short term loan.

 

2.     Loan amount:  Four million five hundred thousand US dollars.

 

3.     Purpose of the loan:  To satisfy the needs of the businessexpansion of the subsidiaries.

 

4.     Loan terms: Three months between 10/22/2004 and 1/22/2005. If the beginning date ofthe loan on any subsequent amendment(s) to renew this loan is different fromthis original date, the beginning date on this agreement should used for thepurpose of calculation. Any subsequent extensions of this loan shall be a partto this agreement and shall have the same binding force.

 

5.     Interest Loan interest rate, calculation ofinterest

(1) Themonthly interest rate shall be 0.257%.

(2)Interest shall be calculated monthly and calculated on every 20th ofthe month. Daily interest rate shall be monthly rate divided by 30.

(3) Anyadjustment of interest rate before the maturity of the loan shall be based onthe bank regulation on interest rate.

 

6.     Condition of releasing the loan to debitor

(1) PartyA properly completed the registration process and satisfied all the legaldocuments for the loan to be released;

(2) If theloan requires collateral, all the conditions are satisfied by Party A or thethird party.

(3) PartyA has not breached any clause that required by for this loan.

 

7.     Payment of interest and principal

(1) PartyA shall pay interest on the interest calculation day. First payment is the dayafter the first calculation day of the month, and last payment shall be madetogether with the principal when the loan matures.

(2) PartyA agrees to accrue sufficient amount to pay interest when due, and remit theinterest payment to Party B’s designated bank account.

(3) PartyA shall reserve sufficient amount in its bank account when the loan matures inorder to payback the principal amount of the loan.

(4) IfParty A fails to payback the loan amount when the loan matures, Party B has theright to dispose the collateral at its discretion or seek legal venue toresolve the issue.

 

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8.     Collateral

Thecollateral required for this loan is the number 3 in the following list;

(1)          Guarantee;

(2)          Collateral;

(3)          Collateral with physical assets; (X) (Lotus equityinterest in Correlant Communications.)

(4)          Letter of credit;

(5)          Counter guarantee;

(6)          Letter of promissory notes;

(7)          Others 

 

9.     The main rights and liabilities of bothparties

(1) Therights and liabilities of Party A:

(A) Therights of Party A

(a) PartyA has the right to ask Party B to release the loan;

(b) PartyA has the right to use the loan under the terms of the loan agreement;

(c) PartyA has the right to ask Party B for extension(s) of the loan with the consent ofParty B;

(d) PartyA has the right to ask Party B to keep the confidentiality of all theinformation regarding its accounting and business operation, except otherwisegoverned by the laws and regulations

(B) Theliabilities of Party A

(a) PartyA shall pay back the principal and interest when the loan matures;

(b) PartyA shall use the loan in accordance with the terms of the agreement, and not usethe loan for other purpose without written consent from Party B;

(c) PartyA shall provide Party B with all the information include but not limitedaccounting, statistics, business planning and KPI, etc. when requested by PartyB.

(d)Without payback the loan amount, Party A shall not use the loan amount ascollateral to secure another loan;

(e) IfParty A will provide guarantee to other parties before the loan is matured,Party A must notice Party B and receives consent from Party B;

(f) PartyA shall provide Party B with additional collateral if the value of thecollateral used for this loan is less that the original stated amount asrequired by the agreement;

(g) PartyA must notify Party B for any changes made to its name, legal person, businessregistration, registered capital, etc.

(h) PartyA must notice Party B within 10 days for any of the following that may affectParty B to exercise its right as a creditor: contract, joint venture, merge,acquisition, spin-off, apply for close of business, apply for bankruptcy, etc.

(i) PartyA shall immediately notify Party B for any of the following: closedown ofbusiness operation, revoke of business license, revoked of businessregistration, any involvement of legal person in illegal activities, becomes aparty to legal action, severe deterioration of financial conditions, andresolve the payment of the loan and collateral under the conditions of Party B;

 

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(2) Rightsand liabilities of Party B

(A) Therights of Party B

(a) PartyB has the rights to get access to the information regarding Party A’s financialand business operation, has the right to ask Party A to provide all theinformation include but not limited to its planning, accounting and KPI data;

(b) PartyB has the right to audit Party A on the use of the loan.

(B) Theliabilities of Party B

(a) PartyB shall release the loan amount to Party A once the agreement is effective,unless for the reasons caused by Party A;

(b) PartyB agrees to keep all the information provided by Party A confidential unlessotherwise mandated by laws and regulations.

 

10.      Change and termination of the loanagreement

(1) Theagreement may be revised, amended or terminated with the written agreement byboth parties. Any changes made shall become part of the whole agreement. If anyprovision of this agreement is held invalid and void, the balance of theprovisions will remain in full force and effect.

(2) IfParty A plans to transfer its rights and liabilities to the third party, itmust get a written consent from Party B, and transfer will not be valid unlessthe third party sign the new loan agreement with Party B;

(3) PartyA must give a 30 day notice to Party for any of the following actions:contract, leasing, merge and acquisition, joint venture, joint corporation,ownership change etc. Party A shall not take any actions unless it receives awritten consent from Party B;

(4) PartyA agrees to continue to bear the responsible for the liabilities of the loaneven though it has joint venture, joint corporation or equity merge, in whichParty A has equity interest.

 

11.Breach of agreement

(1) IfParty A fails to payback the principal when the loan agreement at the maturitydate, Party B has the right accrue the interest at the daily rate of 2.1/10000.

(2) IfParty A fails to pay interest, Party B has the right to accrue the interest atthe daily rate of 2.1/10000. If Party A pays back the principal amount butfails to the accrued the interest, Party B has the right to continue to accruethe interest on the unpaid amount of interest at a daily compound rate of2.1/10000.

(3) IfParty A uses the loan for the purposes other than stated in the loan agreement,Party B has the right to charge a penalty for the breached amount at the dailyrate of 5/10000.

(4) At anytime before the loan agreement matures, Party B has the right to stop releasingthe loan, take back the loan and interest that were release to Party A, ordeduct directly from Party A’s account if Party A:

(a) failsto pay back principal or interest;

(b) usethe loan for other purpose;

(c)provide false information to Party B;

(d)breaches part of the loan agreement;

(e) isinvolved in law suites or litigations that substantially affect Party A’s

 

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business;

(f)deterioration of Party A’s financial situation;

(g) facesany of the following situations: depreciation, damage, loss, frozen of thecollateral and fails to provide new collateral;

(h) Anyactions by Party A that affect its ability to payback the loan principal andinterest.

 

12. Settlementof dispute

Bothparties shall consult with each other for any disputes regarding the loanagreement; unresolved disputes shall be arbitrated by the management of TCLCorporation. During the period of dispute, the balance of the agreement shallbe in full force.

 

13.Others

(1) Anyother issues that are included the loan agreement but pertinent to theagreement, both parties shall follow the laws, rules and regulations of thegovernment;

(2) Theloan agreement shall be effective once it is properly signed by the legalpersons of the two parties. The agreement will be terminated once all theprincipal and interest are fully paid.

(3) Thisagreement will be executed in counterpart copies and each and all of which willbe deemed an original.

 

14.Special clause

(1) PartyA acknowledges that Party B fully consulted with Party A for all the provisionsin the loan agreement.

(2) PartyA acknowledges that it has full comprehension of all the provisions of the loanagreement, and Party B gives all the explanations to Party A for any and all ofthe questions that Party A has.

(3) Bothparties consent that they have no disagreement over the provisions of theagreement.

 

 
|   | Party A:  Legal  person or authorized signer: | /s/Vincent Yan, President &  CEO |   |
|--------|---------------------------------------------------------|--------------------------------------|--------|
|   |                                                    |                                 |
|   | Dated: July 23, 2004                                    |                                 |
|   |                                                    |                                 |
|   |                                                    |                                 |
|   | Party B: Legal person or  authorized signer:            | /s/ Lu Zhongli, Director             |   |
|   |                                                    |                                 |
|   | Dated: July 23, 2004                                    |                                 |
|        |                                                         |                                      |        |  |

 

4

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Translationof $4.5 million loan between Lotus and TCL

 

Controlnumber:

 

Agreementof Internal loans of TCL Industries Holdings (Hong Kong)

 

Debitor (“PartyA)”): Lotus Pacific, Inc.

Creditor(“Party B”): TCL Industries Holdings (Hong Kong) Ltd.

 

Party A,for its business needs, intends to apply a loan from Party B, which agrees tomake such a loan. The both parties agree to reach the flowing agreements basedon mutual consents and governing laws and regulations:

 

1.     Loan type: Short term loan.

 

2.     Loan amount:  Four million five hundred thousand US dollars.

 

3.     Purpose of the loan:  To satisfy the needs of the businessexpansion of the subsidiaries.

 

4.     Loan terms: Six months between 1/22/2005 and 7/21/2005. If the beginning date of theloan on any subsequent amendment(s) to renew this loan is different from thisoriginal date, the beginning date on this agreement should used for the purposeof calculation. Any subsequent extensions of this loan shall be a part to thisagreement and shall have the same binding force.

 

5.     Interest Loan interest rate, calculation ofinterest

(1) Themonthly interest rate shall be 0.257%.

(2)Interest shall be calculated monthly and calculated on every 20th ofthe month. Daily interest rate shall be monthly rate divided by 30.

(3) Anyadjustment of interest rate before the maturity of the loan shall be based onthe bank regulation on interest rate.

 

6.     Condition of releasing the loan to debitor

(1) PartyA properly completed the registration process and satisfied all the legaldocuments for the loan to be released;

(2) If theloan requires collateral, all the conditions are satisfied by Party A or thethird party.

(3) PartyA has not breached any clause that required by for this loan.

 

7.     Payment of interest and principal

(1) PartyA shall pay interest on the interest calculation day. First payment is the dayafter the first calculation day of the month, and last payment shall be madetogether with the principal when the loan matures.

(2) PartyA agrees to accrue sufficient amount to pay interest when due, and remit theinterest payment to Party B’s designated bank account.

(3) PartyA shall reserve sufficient amount in its bank account when the loan matures inorder to payback the principal amount of the loan.

(4) IfParty A fails to payback the loan amount when the loan matures, Party B has theright to dispose the collateral at its discretion or seek legal venue toresolve the issue.

 

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8.     Collateral

Thecollateral required for this loan is the number 3 in the following list;

(1)          Guarantee;

(2)          Collateral;

(3)          Collateral with physical assets; (X) (Lotus equityinterest in Correlant Communications.)

(4)          Letter of credit;

(5)          Counter guarantee;

(6)          Letter of promissory notes;

(7)          Others 

 

9.     The main rights and liabilities of bothparties

(1) Therights and liabilities of Party A:

(A) Therights of Party A

(a) PartyA has the right to ask Party B to release the loan;

(b) PartyA has the right to use the loan under the terms of the loan agreement;

(c) PartyA has the right to ask Party B for extension(s) of the loan with the consent ofParty B;

(d) PartyA has the right to ask Party B to keep the confidentiality of all theinformation regarding its accounting and business operation, except otherwisegoverned by the laws and regulations

(B) Theliabilities of Party A

(a) PartyA shall pay back the principal and interest when the loan matures;

(b) PartyA shall use the loan in accordance with the terms of the agreement, and not usethe loan for other purpose without written consent from Party B;

(c) PartyA shall provide Party B with all the information include but not limitedaccounting, statistics, business planning and KPI, etc. when requested by PartyB.

(d)Without payback the loan amount, Party A shall not use the loan amount ascollateral to secure another loan;

(e) IfParty A will provide guarantee to other parties before the loan is matured,Party A must notice Party B and receives consent from Party B;

(f) PartyA shall provide Party B with additional collateral if the value of thecollateral used for this loan is less that the original stated amount asrequired by the agreement;

(g) PartyA must notify Party B for any changes made to its name, legal person, businessregistration, registered capital, etc.

(h) PartyA must notice Party B within 10 days for any of the following that may affectParty B to exercise its right as a creditor: contract, joint venture, merge,acquisition, spin-off, apply for close of business, apply for bankruptcy, etc.

(i) PartyA shall immediately notify Party B for any of the following: closedown ofbusiness operation, revoke of business license, revoked of businessregistration, any involvement of legal person in illegal activities, becomes aparty to legal action, severe deterioration of financial conditions, andresolve the payment of the loan and collateral under the conditions of Party B;

 

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(2) Rightsand liabilities of Party B

(A) Therights of Party B

(a) PartyB has the rights to get access to the information regarding Party A’s financialand business operation, has the right to ask Party A to provide all theinformation include but not limited to its planning, accounting and KPI data;

(b) PartyB has the right to audit Party A on the use of the loan.

(B) Theliabilities of Party B

(a) PartyB shall release the loan amount to Party A once the agreement is effective,unless for the reasons caused by Party A;

(b) PartyB agrees to keep all the information provided by Party A confidential unless otherwisemandated by laws and regulations.

 

10.      Change and termination of the loanagreement

(1) Theagreement may be revised, amended or terminated with the written agreement byboth parties. Any changes made shall become part of the whole agreement. If anyprovision of this agreement is held invalid and void, the balance of theprovisions will remain in full force and effect.

(2) IfParty A plans to transfer its rights and liabilities to the third party, itmust get a written consent from Party B, and transfer will not be valid unlessthe third party sign the new loan agreement with Party B;

(3) PartyA must give a 30 day notice to Party for any of the following actions:contract, leasing, merge and acquisition, joint venture, joint corporation,ownership change etc. Party A shall not take any actions unless it receives awritten consent from Party B;

(4) PartyA agrees to continue to bear the responsible for the liabilities of the loaneven though it has joint venture, joint corporation or equity merge, in whichParty A has equity interest.

 

11.Breach of agreement

(1) IfParty A fails to payback the principal when the loan agreement at the maturitydate, Party B has the right accrue the interest at the daily rate of 2.1/10000.

(2) IfParty A fails to pay interest, Party B has the right to accrue the interest atthe daily rate of 2.1/10000. If Party A pays back the principal amount butfails to the accrued the interest, Party B has the right to continue to accruethe interest on the unpaid amount of interest at a daily compound rate of2.1/10000.

(3) IfParty A uses the loan for the purposes other than stated in the loan agreement,Party B has the right to charge a penalty for the breached amount at the dailyrate of 5/10000.

(4) At anytime before the loan agreement matures, Party B has the right to stop releasingthe loan, take back the loan and interest that were release to Party A, ordeduct directly from Party A’s account if Party A:

(a) failsto pay back principal or interest;

(b) usethe loan for other purpose;

(c)provide false information to Party B;

(d)breaches part of the loan agreement;

(e) isinvolved in law suites or litigations that substantially affect Party A’s

 

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business;

(f)deterioration of Party A’s financial situation;

(g) facesany of the following situations: depreciation, damage, loss, frozen of thecollateral and fails to provide new collateral;

(h) Anyactions by Party A that affect its ability to payback the loan principal andinterest.

 

12. Settlementof dispute

Bothparties shall consult with each other for any disputes regarding the loanagreement; unresolved disputes shall be arbitrated by the management of TCLCorporation. During the period of dispute, the balance of the agreement shallbe in full force.

 

13.Others

(1) Anyother issues that are included the loan agreement but pertinent to theagreement, both parties shall follow the laws, rules and regulations of thegovernment;

(2) Theloan agreement shall be effective once it is properly signed by the legalpersons of the two parties. The agreement will be terminated once all theprincipal and interest are fully paid.

(3) Thisagreement will be executed in counterpart copies and each and all of which willbe deemed an original.

 

14.Special clause

(1) PartyA acknowledges that Party B fully consulted with Party A for all the provisionsin the loan agreement.

(2) PartyA acknowledges that it has full comprehension of all the provisions of the loanagreement, and Party B gives all the explanations to Party A for any and all ofthe questions that Party A has.

(3) Bothparties consent that they have no disagreement over the provisions of theagreement.

 

 
| Party A:  Legal  person or authorized signer: | /s/Vincent Yan, President &  CEO |   |
|---------------------------------------------------------|--------------------------------------|--------|
|                                                    |                                 |
| Dated: January 23, 2005                                 |                                 |
|                                                    |                                 |
|                                                    |                                 |
| Party B: Legal person or  authorized signer:            | /s/ Yuan Bing                        |   |
|                                                    |                                 |
| Dated: January 31, 2005                                 |                                 |
|                                                         |                                      |        |  |  |

 

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