**Exhibit 10.9**

 

**EQUITY PURCHASEAGREEMENT**

 

 

This **EQUITY PURCHASE AGREEMENT**,dated as of December 20,2003 (this “Agreement”), is made and entered into by and among Lotus Pacific,Inc., a Delaware corporation (“Seller”), TCL Information Technology Industrial (Group)Ltd., a corporation incorporated in the British Virgin Islands (“Buyer”) andTCL Digital Technologies, Ltd., a corporation incorporated in the People’sRepublic of China (the “Company”) with reference to the following facts:

 

 

**RECITALS**

 

A.            Seller is the record and beneficial owner of 50% of theequity (the “Equity”) of the Company.

 

B.            Seller desires to sell the Equity, which represents allof the Equity of the Company held by Seller, to Buyer and Buyer desires topurchase the Equity from Seller upon the terms and conditions set forth herein.

 

NOW, THEREFORE, inconsideration of the above premises, and the representations, warranties,covenants, conditions, and promises exchanged by the parties hereto, Buyer andSeller hereby agree as follows:

 

ARTICLE 1DEFINITIONS

 

1.1           Defined Terms.  Unless otherwise defined in this Agreement,the capitalized terms used in the above premises and throughout this Agreementshall have the meanings set forth in this Section 1.1.

 

Claim:  Any claim, legal or equitable cause ofaction, suit, litigation, proceeding (including a regulatory or administrativeproceeding), grievance, complaint, demand, charge, investigation, audit,arbitration, mediation, or other process for settling disputes ordisagreements, including without limitation, any of the foregoing processes orprocedures in which injunctive or equitable relief is sought.

 

Liability:  Any liability, loss, cost, debt,indebtedness, lien, Claim, expense, loss of tax benefits or deductions,assessment, fine, penalty, deficiency, interest, payment, contract, judgment,damages of every kind and nature or other obligation (whether due or payable,absolute or contingent, liquidated or unliquidated, secured or unsecured).

 

Person:  Any individual, trustee, corporation, generalor limited partnership, limited liability company or partnership, jointventure, joint stock company, bank, firm, Governmental Authority, trust,association, organization or unincorporated entity of any kind.

 

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1.2           Use of Defined Terms.  Any defined term used in the plural shallrefer to all members of the relevant class and any defined term used in thesingular shall refer to any one or more of the members of the relevant class.

 

ARTICLE 2PURCHASE OF THE EQUITY

 

2.1           Sale of the Equity.  Upon the terms and subject to the conditionscontained in this Agreement, as of the Closing, Seller shall fully andirrevocably sell, assign, transfer, convey, and deliver to Buyer the Equity,free and clear of any all encumbrances, pledges, Claims, restrictions,judgments, defects in title, limitations, Liabilities, restrictions ontransferability, or other liens, together with all of the right, title,interest, and other incidents of ownership in and to such Equity which Sellermay have or possess.  Such sale,assignment, transfer, conveyance, and delivery shall be effected by Seller’sdelivery at Closing (as defined in Section 6.1) to Buyer of (i) thecertificates representing the Equity held by such Seller, all duly endorsed inblank, if any, and with all necessary documentary stamps affixed thereto, or(ii) such other assignments, documents of transfer, instruments, or other itemsas reasonably requested by Buyer for the purpose of assigning, assuming,transferring, conveying, perfecting, confirming, and/or reducing to possessionthe Equity held by Seller.

 

2.2           Purchase of the Equity.  Upon the terms and subject to the conditionscontained in this Agreement, as of the Closing, Buyer shall purchase, all andnot less than all, of the Equity and, in consideration of and in exchange forthe purchase of the Equity, Buyer shall pay Seller the Purchase Price for theEquity held by Seller in the amount and in the manner hereinafter set forth:

 

2.2.1        Purchase Price.  At Closing, Buyer shall pay Seller cash inthe aggregate amount of US$5,622,000 (the “Purchase Price”).

 

2.2.2        Manner of Payment.  Payment of the Purchase Price shall, atBuyer’s election, be paid via wire transfer or other form of electronic fundstransmission pursuant to payment instructions delivered by Seller to Buyer nolater than two (2) business days prior to the Closing Date (as defined inSection 6.2).

 

2.3           Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN THISAGREEMENT, SELLER HAS NOT MADE AND DOES NOT MAKE (NOR SHALL SELLER BE DEEMED TOHAVE MADE OR TO MAKE BY VIRTUE OF THE SALE OF THE EQUITY TO BUYER OR ANY OTHERFACT OR CIRCUMSTANCE WHATSOEVER) TO BUYER OR ANY OTHER PERSON ANYREPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO OR IN CONNECTIONWITH THE EQUITY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTYOF TITLE, WHICH IS EXPRESSLY DISCLAIMED AND EXCLUDED.  THERE ARE NO SUCH REPRESENTATIONS OR WARRANTIES WHATSOEVER OFSELLER OTHER THAN THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH INTHIS AGREEMENT, WHICH REPRESENTATIONS AND WARRANTIES ARE EXCLUSIVE AND IN LIEUOF ALL OTHER REPRESENTATIONS AND WARRANTIES OF SELLER

 

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WITH RESPECT TO THE SALEOF THE SHARES, ANY ASSET OR PROPERTY OF THE COMPANY OR ITS BUSINESS, WHETHERSTATUTORY, WRITTEN, ORAL OR IMPLIED.

 

ARTICLE 3REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents,warrants, and covenants to Seller the accuracy and completeness of the mattersset forth in this Article 3 as of the date hereof and as of the Closing Date.

 

3.1           Corporate Authority.  Buyer has the requisite corporate power andauthority to enter into this Agreement and any related documents to which Buyeris a party and to carry out its obligations hereunder and thereunder.  The execution, delivery, and performance ofthis Agreement and any related documents, and the consummation of thetransactions contemplated hereby and thereby have been duly and validly authorizedby all necessary corporate action on the part of Buyer.  This Agreement and any related documentswill have been duly and validly executed and delivered by Buyer, and are thevalid and binding agreements of Buyer, enforceable against Buyer in accordancewith their terms, subject to (i) laws of general application relating tobankruptcy, insolvency, and the relief of debtors, and (ii) rules of lawgoverning specific performance, injunctive relief, and other equitableremedies.

 

3.2           No Violation.  The execution, delivery, and performance ofthis Agreement and any related document, and the consummation of thetransactions contemplated hereby and thereby will not constitute, nor withnotice or lapse of time or both would constitute: (i) a violation of Buyer’scharter documents (as amended or restated to date), bylaws or operatingagreements (as amended or restated to date) or resolutions or actions ofBuyer’s owners or governing body or duly authorized committees thereof, or (ii)a breach of or default under any contract or judgment to which Buyer is subjector bound.

 

3.3           Investment.  Buyer is acquiring the Equity for investmentpurposes only for its own account, and not with a view to, or for resale inconnection with, any distribution thereof, and it has no present intention ofselling or distributing any such securities.

 

3.4           No Public Market. Buyerunderstands that no public market now exists for any of the Securities issuedby the Company and that it is uncertain whether a public market will ever existfor the Equity.

 

3.5           Access to Data.  Buyer has had an opportunity to discuss theCompany’s business, management and financial affairs with its management and toobtain any additional information necessary or appropriate for deciding whetheror not to purchase the Equity.

 

3.6           Knowledge And Experience.  Buyer has such knowledge and experience infinancial and business matters that it is capable of evaluating the merits andrisks of an investment in the Equity, and it is able to bear the economic riskof such investment.  Further, Buyer hassuch knowledge and experience in financial and business matters that he, she orit is capable of utilizing the information made available to him, her or it inconnection with the

 

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purchase of the Equity,of evaluating the merits and risks of an investment in the Equity and of makingan informed investment decision with respect to the Equity.

 

ARTICLE 4REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Companyrepresents, warrants, and covenants to Buyer and Seller the accuracy andcompleteness of the matters set forth in this Article 4 as of the date hereofand as of the Closing Date.

 

4.1           Organization and Corporate Power.  The Company is a corporation duly organized,validly existing and in good standing under the laws of the People’s Republicof China and is qualified in all jurisdictions in which the nature of itsproperty owned or leased by it or the conduct of its business requires suchqualification, except for such jurisdictions where the failure to so qualifywould not individually or in the aggregate materially and adversely affect thebusiness, operations or financial condition of the Company.  The Company has all requisite corporatepower and authority necessary to own and operate its properties and to carry onits business as now conducted and to enter into and to carry out the provisionsof this Agreement and the transactions contemplated hereby.  The Company has no subsidiaries oraffiliated companies and does not otherwise directly or indirectly control orown any other corporation, association, partnership, joint venture or otherbusiness entity or arrangement.

 

4.2           Capitalization.  Immediately prior to the Closing, theCompany’s equity is held by the following entities and individuals in thefollowing respective percentages: Seller (50%), five individuals, Liu Dongyuan(29.8279%), Cheng Fei (10.1528%), Gao Jianou (3.1379%), Wang Huansheng(1.6745%), and Han Jingzhe (0.2069%), and TCL Computer Technology (5%).

 

4.3           Title to Property.  The Company has good and marketable title toall of its properties and assets, free and clear of restrictions or conditionson transfer or assignment and free and clear of mortgages, liens, pledges,charges, encumbrances, equities, claims, easements, rights of way, covenants,conditions or restrictions, except for current taxes and assessments notdelinquent and for matters that are not material, individually or in theaggregate, and do not materially detract from or interfere with the present orintended use of any of these assets, nor materially impair the business,operation or proposed operation of the Company.

 

4.4           Patents and Other IntangibleRights.  The Company has good title(without any unlawful misappropriation) to all Intellectual Property (asdefined hereinafter) of the Company, or adequate licenses and rights to use theIntellectual Property of others, which is necessary for the conduct of thebusiness of the Company as now conducted, and, to the knowledge of the Company,no individual or entity (other than the Company) owns any interest in, or hasmade any claim with respect to any Intellectual Property.  To the knowledge of the Company, the Companyis not infringing upon or otherwise acting adversely to the right or claimedright of any person with respect to any of the foregoing.  None of the Intellectual Property is subjectto any mortgage, pledge, lien, charge, security interest or encumbrance orlease or license or any claim or litigation proceedings alleging a violation ofthe right of any third party.  To theknowledge of the Company, no officer, director or employee of the Company isunder any restriction, whether

 

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contractual, or by virtueof previous employment or otherwise, that would prevent him from performing hisduties for the Company or prevent the Company from using the IntellectualProperty.  For the purposes of thisSection 4.4, the term “Intellectual Property” means, with respect to theCompany, (a) inventions, whether or not reduced to practice and whether or notyet made the subject of a pending patent application or applications, (b) ideasand conceptions of potentially patentable subject matter, including, withoutlimitation, any patent disclosures, whether or not reduced to practice and whetheror not yet made the subject of a pending patent application or applications,(c) statutory invention registrations, patents, patent registrations and patentapplications and all improvements to the inventions covered in each suchregistration, patent or application, (d) trademarks, service marks, tradedress, logos, symbols, trade names and corporate names and registrations andapplications for registration thereof, (e) copyrights (registered or otherwise)and registrations and applications for registration thereof, (f) computersoftware, source code, data and documentation, (g) trade secrets andconfidential business information (including ideas, formulas, compositions,inventions, and conceptions of inventions whether patentable or unpatentableand whether or not reduced to practice), technology (including know-how andshow-how), manufacturing and production processes and techniques, research anddevelopment information, drawings, specifications, designs, plans, proposals,technical data, copyrightable works, financial, marketing and business data,pricing and cost information, business and marketing plans and customer andsupplier lists and information, (h) copies and tangible embodiments of all ofthe foregoing, in whatever form or medium, (i) all rights to obtain and rightsto apply for patents, and to register trademarks and copyrights, and (j) allrights to sue for present and past infringement of any of the IntellectualProperty rights hereinabove set out.

 

4.5           Litigation.  There are no (and the Company is not awareof any basis for any) (a) actions, proceedings or investigations pending or anythreat thereof, or verdicts or judgments entered against the Company or any ofits officers, directors or affiliates before any court or before any administrativeagency or officer which questions the validity of the Agreement or the right ofthe Company to enter into them or to consummate the transactions contemplatedthereby, or which might result, individually or in the aggregate, in anymaterial adverse change in the business, properties or condition, financial orotherwise, of the Company or (b) violations by the Company of any foreign,federal, state or local laws, rules, regulations or orders.

 

4.6           Financial Statements.  A copy of the Company’s unaudited monthlybalance sheets from March 2003 (the month the Company started its operations)through the end of June 2003 (the “Financial Statements”) has previously beenprovided to Buyer and Seller.  TheFinancial Statements (a) are complete and correct in all material respects; and(b) fairly present, in all material respects, the financial position of theCompany as of the date thereof and the results of the operations of the Companyfor the periods covered thereby.  Sincethe date of the last Financial Statement, there has been no material adversechanges to the Company’s business, finances or prospects and the Company hasoperated its business in the ordinary course.

 

4.7           Fees, Commissions and Expenses.  The Company has made no agreements orarrangements for brokerage commissions, finders’ fees or similar compensationin connection with the transactions contemplated by this Agreement.

 

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4.8           Government and Equity HolderConsents.  Other than final approvalfor the change of ownership of the Equity from the relevant authorities orregulatory bodies in China, and the filing and registration incidental thereto,no consent, approval, order, authorization, registration, qualification,designation, license, declaration or filing with any local, state or municipalauthority is required on the part of the Company in connection with theconsummation of the transactions contemplated herein.  This Agreement or the transactions consummated hereby do notrequire approval or consent from the other equity holders of the Company whoare not party to this Agreement.

 

4.9           No Violation.  The execution, delivery, and performance ofthis Agreement and any related document, and the consummation of thetransactions contemplated hereby and thereby will not constitute, nor withnotice or lapse of time or both would constitute: (i) a violation of Company’scharter documents (as amended or restated to date), bylaws or operatingagreements (as amended or restated to date) or resolutions or actions ofCompany’s owners or governing body or duly authorized committees thereof, or(ii) a breach of or default under any contract or judgment to which Company issubject or bound.

 

4.10         Validity of Issuance.  The Equity, when transferred, sold, and delivered,and, assuming the accuracy and completeness of Seller’s representationshereunder, will be free and clear of any pledges, security interests, claims,liens or encumbrances and, assuming the accuracy and completeness of Buyer’srepresentations hereunder, and will have been issued in compliance with allapplicable state and federal securities laws.

 

4.11         Disclosure.  Neither this Agreement nor any of thematerials relating hereto, or relating to the transactions contemplated hereby,contain any untrue statements of a material fact or omit a material factnecessary to make the statements contained herein or therein notmisleading.  The financial and similarprojections provided to Buyer with respect to the Company are merelydescriptions and estimates made by the Company and are not intended to becommitments of the Company.  There is nofact known to the Company which (individually or in the aggregate) materiallyadversely affects the business, operations, affairs, condition, properties,assets or prospects of the Company which has not been set forth in thisAgreement, or any other related transaction agreements.

 

4.12         Material Contracts.  The Company has made available to Buyer allmaterial contracts, agreements or instruments of the Company.

 

4.13         No Debt.  Except for the amounts set forth on theFinancial Statements, as of the Closing, the Company shall have no Indebtedness(defined below).  “Indebtedness,” forthe purposes hereof, shall mean, without duplication, the outstanding principalamount of, and all interest, penalties, premiums and other amounts accrued inrespect of, (i) all indebtedness for borrowed money of the Company, whether ornot recourse to the Company, (ii) every obligation of the Company evidenced bybonds, debentures, notes or other similar instruments, (iii) everyreimbursement obligation of the Company with respect to letters of credit,banker’s acceptances or similar facilities issued for the account of theCompany, (iv) every obligation of the Company issued or assumed as the deferredpurchase price of property or services of any type, (v) every capital leaseobligation of the Company, (vi) all obligations of the Company upon whichinterest charges are customarily paid (but excluding trade accounts payablearising in the ordinary course

 

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of business consistentwith past practice), and (vii) every obligation of the type referred to inclauses (i) through (vi) of another person, the payment of which the Companyhas guaranteed, or for which the Company is responsible or liable, directly orindirectly, jointly or severally, as obligor, guarantor or otherwise.

 

4.14         Transactions with Affiliates.  The Company has no agreements,understandings or proposed transactions, including any agreements,understandings or proposed transactions between the Company and any of itsofficers, directors, affiliates or any affiliate thereof.

 

4.15         Permits.   The Company has all franchises, permits,licenses, orders, certificates, authorizations, approvals and any similarauthority necessary for the conduct of its business as it is planned to beconducted, the lack of which could materially affect the business, propertiesprospects or financial condition of the Company.

 

ARTICLE 5REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents,warrants, and covenants to Buyer the accuracy and completeness of the mattersset forth in this Article 5 as of the date hereof and as of the Closing Date:

 

5.1           Authority.  Seller has the requisite corporate, entity,or other power and authority to enter into this Agreement and any relateddocuments to which it is a party and to carry out its obligations hereunder andthereunder. The execution, delivery, and performance of this Agreement and anyrelated documents and the consummation of the transactions contemplated herebyand thereby have been duly and validly authorized by all necessary corporate,entity, or other action on the part of Seller. This Agreement and any related documents will have been duly and validlyexecuted and delivered by Seller and are the valid and binding agreements ofsuch Seller, enforceable against it in accordance with their terms, subject to(i) laws of general application relating to bankruptcy, insolvency and therelief of debtors, and (ii) rules of law governing specific performance,injunctive relief and other equitable remedies.

 

5.2           No Consents. Other than finalapproval for the change of ownership of the Equity from the relevantauthorities or regulatory bodies in China and the filing and registrationincidental thereto of the Chinese government, there are no approvals,authorizations, consents, orders, licenses, permits, or other actions of,declarations, filings, or registrations with or notices to be furnished to anyPerson in connection with the execution, delivery, or performance of thisAgreement by Seller or Seller’s sale of the Equity to Buyer as contemplatedhereby which will not have been made, obtained, or furnished prior to theClosing.

 

5.3           No Violation.  The execution, delivery, and performance ofthis Agreement and any related document to which Seller is a party, and theconsummation of the transactions contemplated hereby and thereby will notconstitute, nor with notice or lapse of time or both would constitute:  (i) a violation of such Seller’s certificateof incorporation (as amended or restated to date), bylaws (as amended orrestated to date); or (ii) the creation or imposition of any lien orencumbrance affecting or encumbering the Equity held by such Seller.

 

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5.4           Ownership of the Equity.Seller is the sole and exclusive record, legal, and beneficial owner of, andhas good, valid, and indefeasible title to the Equity and has fulfilled itsobligation to pay or contribute additional capital or fund in the aggregateamount of US$1,842,216.71 under the Articles of Association of the Companydated January 18 2003 (“Capital Contribution”), and upon payment of thePurchase Price for the Equity, Buyer will acquire the Equity free and clear ofany encumbrances, pledges, Claims, restrictions, judgments, defects in title,limitations, Liabilities, restrictions on transferability, or other liens ofany kind or nature, together with all of the right, title, interest, and otherincidents of ownership in and to such Equity which Seller may have or possess.

 

ARTICLE 6CLOSING; CLOSING CONDITIONS

 

6.1           The Closing.   The parties acknowledge and agree that theconsummation of the transactions contemplated under this Agreement shall occurcontemporaneously with the execution of this Agreement.  Only when all such transactions have beenconsummated and the Purchase Price has been paid shall the closing (the“Closing”) of the transactions under this Agreement have occurred.

 

6.2           Closing Logistics.  The Closing shall occur at the offices ofthe Company, on August         , 2003(the “Closing Date”) or such other time, date and place, as mutually agreedupon by all of the parties.   All acts,deliveries, and confirmations comprising the Closing, including satisfaction ofall conditions precedent to Closing, regardless of chronological sequence,shall be deemed to occur contemporaneously and simultaneously as of 11:59 p.m.on the Closing Date and no such act, delivery, confirmation, or condition shallbe effective unless and until the last of all such items shall haveoccurred.  The parties shall use goodfaith efforts to effectuate the Closing on the day on which this Agreement isfully executed by all parties.

 

6.3           Buyer’s Closing Conditions.  The obligations of Buyer to proceed toClosing are subject to the full satisfaction, at or prior to Closing, of thefollowing conditions precedent:

 

6.3.1        Representations and Warranties areTrue.  The representations andwarranties made by Company in Article 4 and Seller in Article 5 of thisAgreement shall be true and correct as of the Closing Date as though made onand as of the Closing Date.

 

6.3.2        Deliver Share Certificates; PerformCovenants.  Seller shall havedelivered to Buyer the certificates representing the Equity and shall havesatisfied their other covenants, obligations, and agreements set forth in thisAgreement which are required to be fulfilled by Seller prior to or at theClosing.

 

6.3.3        Delivery of Signature Page.  Seller and the Company shall have deliveredto Buyer an executed signature page to this Agreement and such otherinstruments, assignments, and documents as Buyer’s legal counsel may reasonablyrequest, consistent with the intent and purposes of this Agreement.

 

6.3.4        Examination of Books and Records.  The Company will have made available toBuyer (who may appoint representatives to perform such inspection) duringnormal

 

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business hours, forinspection and copying, all of the Company’s books, records, contracts anddocuments of or relating to the Company.

 

6.3.5        Suits/Proceedings.  No action, suit, proceeding or investigationby or before any court, administrative agency or other governmental authorityshall have been instituted or threatened to restrain, prohibit or invalidatethe transactions contemplated by this Agreement.

 

6.3.6        Performance.  The Company and Seller will have dulyperformed and complied in all material respects with each of the terms,agreements and conditions required by this Agreement to be performed andcomplied with by it prior to or at the Closing.

 

6.3.7        Compliance with Laws and Regulations.  The sale of the Equity to Buyer shall bepermitted by all applicable laws and regulations.

 

6.3.8        Deliver proof of Capital Contribution.  Seller shall have delivered to Buyersatisfactory documentary evidence that Seller has fully fulfilled its CapitalContribution obligations.

 

6.4           Seller’s Closing Conditions.  The obligations of Seller to proceed toClosing are subject to the full satisfaction, at or prior to Closing, of thefollowing conditions precedent:

 

6.4.1        Representations and Warranties areTrue. The representations and warranties of Buyer made in Article 3 and theCompany in Article 4 of this Agreement shall be true and correct as of theClosing Date as though made on and as of the Closing Date.

 

6.4.2        Purchase Price; Perform Covenants.  Buyer shall have paid to Seller the PurchasePrice and satisfied Buyer’s other covenants, obligations, and agreements as setforth in this Agreement which are required to be fulfilled by Buyer prior to orat the Closing.

 

6.4.3        Delivery of Signature Page.  Buyer and the Company shall have deliveredto Seller an executed signature page to this Agreement and such otherinstruments, assignments and documents as Seller’s legal counsel may reasonablyrequest, consistent with the intent and purposes of this Agreement.

 

6.4.4        Performance.  Buyer and the Company will have dulyperformed and complied in all material respects with each of the terms,agreements and conditions required by this Agreement to be performed orcomplied with by it prior to or at the Closing.

 

6.4.5        Suits/Proceedings.  No action, suit, proceeding or investigationby or before any court, administrative agency or other governmental authoritywill have been instituted or threatened to restrain, prohibit or invalidate thetransactions contemplated by this Agreement.

 

6.4.6        Compliance with Laws and Regulations.  The sale of the Equity to Buyer shall bepermitted by all applicable laws and regulations.

 

6.5           Closing Assurances.  If at any time before or after the Closinglegal counsel for any party hereto shall deem it necessary or reasonablyappropriate to take further or additional

 

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steps or to executefurther or additional agreements, instruments, documents, or certificates forthe purpose of confirming, evidencing, or fully consummating any of thetransactions contemplated under this Agreement or any transaction incidentthereto, then all applicable parties shall execute, acknowledge, and deliverany such agreements, instruments, documents, or certificates or take suchfurther or additional steps consistent with the intent and purposes of thisAgreement.

 

ARTICLE 7MISCELLANEOUS PROVISIONS

 

7.1           Notices.  Any and all notices, requests, consents,demands, or other communications required or permitted to be given under thisAgreement shall be in writing and shall be deemed to have been duly given (i)when delivered, if sent by United States registered or certified mail (returnreceipt requested), (ii) when delivered, if delivered personally by commercialcourier, (iii) on the second (or the seventh, for overseas address) followingbusiness day, if sent by United States Express Mail or overnight courier, or(iv) upon the date reflected on a fax confirmation from the transmitting faxmachine, if sent by facsimile transmission and delivery of the facsimiletransmission is confirmed telephonically within one (1) business day, in eachcase to the parties at the following addresses or facsimile numbers (or at suchother addresses or facsimile numbers as shall be specified by like notice) withapplicable postage or delivery charges prepaid:

 
|   | If to Seller:   |                                                |
|--------|-----------------|-----------------------------------------------------|
|   |            | Lotus Pacific, Inc.                                 |
|   |            | 2402 Michelson Drive,  Suite 220                    |
|   |            | Irvine, CA 92612                                    |
|   |            | Attn: CFO                                           |
|   |            | Fax:  949-475-1808                             |
|   |            |                                                |
|   | With a copy to: |                                                |
|   |            | Reed Smith LLP                                      |
|   |            | 1901 Avenue of the  Stars, Suite 700                |
|   |            | Los Angeles, CA 90067                               |
|   |            | Attn: John M. Iino,  Esq.                           |
|   |            | Fax: 310-734-5299                                   |
|   |            |                                                |
|   | If to Buyer:    |                                                |
|   |            | TCL Information  Technology Industrial (Group) Ltd. |
|   |            | 13/F TCL Tower                                      |
|   |            | 8 Tai Chung Road                                    |
|   |            | Tsuen Wan                                           |
|   |            | New Territories                                     |
|   |            | Hong Kong                                           |

 

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|   | If to Company: |                                    |
|--------|----------------|-----------------------------------------|
|   |           | TCL Digital  Technologies, Ltd.         |
|   |           | A18 Sanhuan Xi Road,  North, Suite B409 |
|   |           | Haidian District,  Beijing, China       |

 

7.2           Expenses.  Each party hereto shall pay its own costsand expenses (including all legal and accounting fees) arising from thenegotiation, execution, and performance of this Agreement, whether or not thetransactions contemplated hereunder are consummated.

 

7.3           Indemnification.  Subject to Section 2.3, the parties heretoagree to indemnify, defend and hold harmless the other parties and the otherparties’ officers, directors, employees, stockholders, parent companies, directand indirect subsidiaries, joint venture partners, affiliates, partners,agents, attorneys, independent accountants, auditors, insurers,representatives, predecessors, successors and assigns (collectively,“Indemnitees”), from and after the Closing Date, for a period of such claim’sapplicable statute of limitations, against any damages, losses, obligations,liabilities, claims, encumbrances, deficiencies, costs and expenses, includingwithout limitation, reasonable attorneys’ fees and other costs and expensesincident to any action, investigation, claim or proceeding (all hereafterreferred to as “Losses”), arising out of or relating to any misrepresentationor breach of or default in connection with any representation, warranty,covenant or agreement given or made by the indemnifying party hereto (the“Indemnifying Party”) in this Agreement. In the event an Indemnitee become aware of a third-party claim whichIndemnitee believes may result in an indemnification demand under this Section7.3, the Indemnitee shall promptly notify the Indemnifying Party of such claim,and Indemnifying Party shall be entitled, at its expense, to participate in anydefense of such claim.  Indemnitee shallhave the right in its sole discretion to settle any such claim; provided,however, that the Indemnitee may not effect the settlement of any such claimwithout the consent of the Indemnifying Party, which consent shall not beunreasonably withheld.  In the eventthat the Indemnifying Party has consented to any such settlement, IndemnifyingParty shall have no power or authority to object to the amount of any claim byIndemnitee for indemnity under this Section 7.3 with respect to suchsettlement.

 

7.4           Confidentiality of this Agreement;Publicity.  Each of the terms andconditions of this Agreement shall be confidential and each of the partieshereto agrees to maintain the confidentiality of this Agreement and each of itsterms and provisions hereof.  Unlessrequired by court order, other legal process, applicable law or regulations(including without limitation, applicable securities laws and stock exchangerules), or if consented to by all other parties hereto, this Agreement may notbe disclosed by any party hereto and no party may issue or release any publicannouncement, press release, statement, or acknowledgment of the existence of,or reveal publicly the terms, conditions, or status of, the transactionsprovided for herein without the prior written consent of all of the otherparties as to the content and timing of release of and the media in which suchstatement or announcement is to be made. Each party hereto agrees that he, sheor it will not unreasonably withhold any such consent or clearance to publicannouncements.

 

7.5           Headings.  The headings of the several sections of thisAgreement are inserted for convenience of reference only and are not intendedto affect the meaning or interpretation of this Agreement.

 

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7.6           Entire Agreement.  This Agreement and the documents relatingthereto constitute the final written integrated expression of all of theagreements between the parties hereto with respect to the matters addressedherein.  This Agreement supersedes allprior or contemporaneous, written or oral, memoranda, arrangements, contracts,or understandings between or among the parties hereto relating to the subjectmatter hereof.  Any representations,promises, warranties, or statements made by any party which differ in any wayfrom the terms of this Agreement, shall be given no force or effect.  The parties specifically represent, each tothe other, that there are no additional or supplemental agreements or contractsbetween them related in any way to the matters herein contained unless specificallyincluded or referred to herein.

 

7.7           Amendments.  This Agreement may not be amended, modified,supplemented, or changed, in any minor or material respect, or any provisionhereof waived, unless accomplished through a dated, written instrument whichhas been signed by the parties hereto.

 

7.8           Waiver. Neither consummationof the transactions contemplated hereunder nor any action taken pursuant tothis Agreement, including without limitation any investigation by or on behalfof any party, shall be deemed to constitute a waiver by the party taking suchaction or waiver of compliance with any representation, warranty, condition oragreement contained herein.  Waiver ofthe breach of any one or more provisions of this Agreement shall not be deemedor construed to be a waiver of other breaches or subsequent breaches of thesame provisions.

 

7.9           Severability.  In the event that any provision in thisAgreement shall be found by a governmental authority or arbitrator of competentjurisdiction to be invalid, illegal or unenforceable, such provision shall beconstrued and enforced as if it had been narrowly drawn so as not to beinvalid, illegal or unenforceable, and the validity, legality, andenforceability of the remaining provisions of this Agreement shall not in anyway be affected or impaired thereby.

 

7.10         Successors and Assigns.  None of the parties hereto may assign thisAgreement or delegate any obligations or duties hereunder, whether voluntarily,involuntarily, or by operation of law, except with the prior written consent ofall of the other parties to this Agreement; provided, however, that Buyer mayassign this Agreement or delegate its duties to any of its affiliates withoutobtaining the consent of any party hereto; provided, further however, the assigningparty shall not be released from its obligations hereunder.  If this Agreement is assigned or dutieshereunder delegated as permitted hereunder, then this Agreement shall bebinding upon the respective successors, successors-in-interests, transferees,and assigns of all of the parties hereto.

 

7.11         Governing Law; Consent toJurisdiction.  This Agreement andthe rights and obligations of the parties hereunder shall be construed,interpreted, and enforced in accordance with, and governed by, the laws of theState of California, without regard to principles relating to conflicts of law,and of the laws of the United States. Any legal action, suit or proceeding arising out of or relating to thisAgreement may be instituted in any state or federal court located within theCounty of Los Angeles or County of Orange, State of California, and each partyagrees not to assert, by way of motion, as a defense, or otherwise, in any suchaction, suit or proceeding, any claim that it is not subject personally to the jurisdictionof such court in an inconvenient forum, that the venue of the action, suit orproceeding is improper or that this

 

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Agreement or the subjectmatter hereof may not be enforced in or by such court.  EACH PARTY FURTHER IRREVOCABLY SUBMITS TOTHE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING.  Any and all service of process shall beeffective against any party if given personally or by registered or certifiedmail, return receipt requested, or by any other means of mail that requires asigned receipt, postage prepaid, mailed to such party as herein provided.  Nothing herein contained shall be deemed toaffect the right of any party to serve process in any manner permitted by lawor to commence legal proceedings or otherwise-proceed against any other partyin any jurisdiction.

 

7.12         Construction.  This Agreement has been drafted with thejoint participation of each of the parties hereto and shall be construed to beneither against nor in favor of any party hereto, but rather in accordance withthe fair meaning hereof.

 

7.13         Voluntary Execution of Agreement.  This Agreement is executed voluntarily andwithout any duress or undue influence on the part of any of the parties hereto.  Each of the parties acknowledge and agreethat:  (i) it has read thisAgreement;  (ii) it has been representedin the preparation, negotiation, and execution of this Agreement by legalcounsel of its own choice or that it has voluntarily declined to seek suchcounsel; and (iii) is fully aware of the legal and binding effect of thisAgreement.

 

7.14         Attorneys’ Fees.  In the event of any dispute with respect tothe subject matter of or construction of this Agreement (including anarbitration or mediation), the prevailing party shall be entitled to recoverits reasonable attorneys’ fees and court, arbitration, or mediation costsincurred in resolving or settling the dispute, in addition to any and all otherdamages or relief which a court, arbitrator or mediator may deem proper.

 

7.15         No Third Party Beneficiaries.  This Agreement is not intended to conferupon any Person other than the parties hereto any rights or remedies hereunder.

 

7.16         Counterparts.  This Agreement may be executed in two ormore counterparts, each of which shall be binding and collectively shallconstitute one and the same agreement.

 

7.17         Waiverof Jury Trial.  EACH OF THE PARTIES HEREBY WAIVES TRIAL BYJURY IN ANY ACTION OR PROCEEDING TO WHICH HE, SHE OR IT MAY BE PARTIES, ARISINGOUT OF, OR IN ANY WAY PERTAINING TO, THIS AGREEMENT.  IT IS AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BYJURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS.  THIS WAIVER IS KNOWINGLY, WILLINGLY ANDVOLUNTARILY MADE BY THE PARTIES AND EACH PARTY HEREBY REPRESENTS THAT NOREPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON TO INDUCE THISWAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.

 

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IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be duly executed and delivered asof the date first above written.

 
| **Seller:**  | **LOTUS PACIFIC, INC.**                                 |
|--------------|---------------------------------------------------------|
|         |                                                    |
|         |                                                    |
|         | By:                                                     | /s/ Yiming Foo |   |
|         | Name:  Yimin Foo, Chief Financial Officer          |
|         |                                                    |
| **Buyer:**   | **TCL INFORMATION TECHNOLOGY  INDUSTRIAL (GROUP) LTD.** |
|         |                                                    |
|         |                                                    |
|         | By:                                                     | /s/ Li Dongsheng |   |
|         | Name: Li Dongsheng                                      |
|         | Title: Chairman                                         |
|         |                                                    |
| **Company:** | **TCL DIGITAL TECHNOLOGIES, LTD.**                      |
|         |                                                    |
|         |                                                    |
|         | By:                                                     | /s/ Li Dongsheng |   |
|         | Name: Li Dongsheng                                      |
|         | Title:  Chairman                                   |

 

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