Contract No.: ID - 23a-2002
Investment and Cooperation Agreement
IDN Telecom, Inc. ("IDN")
Address: 46500 Fremont Blvd., #702 Fremont, CA 94538, USA
Tel: 1-510-979-2150
Fax: 1-510-979-2155
Cirmaker Industry Co., Ltd. ("Cirmaker")
Address: No. 607 Jung Shing Rd., Tz Tsuen, Shin Wu, Taoyuan, Taiwan, R.O.C.
Tel. 886-3- 487-1988 Ext 12
Fax. 886-3-487-1999
1. Background
In consideration of the mutual benefit to the business expansion of the
Agreement parties, the establishment of close cooperation stands as a
significant milestone. Specially at the time to explore the digital cable TV
service market in China that is expected to become a large scale and fast
developing market in the coming five years.
As a result of the great success of IDN in developing digital cable TV head end
system (digital cable TV storage, broadcast and transmission) and next
generation Set Top Box, two of the major keys to digital cable TV service as
well as its independent design of head end system software and core chip set of
Set Top Box, local cable TV company has been able to cut its investment on
formation of digital cable TV system and end users quite considerably. In
addition, IDN fully copes with the upcoming digital cable TV standards with
China authorities, the digital cable TV service in China has been accelerated.
On the other hand, Cirmaker possesses abundant resources in funding and Set Top
Box manufacturing. The cooperation of the parties will not only reach success
in China and international digital cable TV service market, but also will
facilitate IPO progress for both parties. Hence, through friendly negotiation,
both parties have acquired sufficient information about the other party and have
decided to proceed with the investment and cooperation agreement as contemplated
hereby,
2. Terms and Conditions:
2.1 IDN shall provide Cirmaker technical and manufacture documents of Set Top
Box (or
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the "Products") free of charge so that Cirmaker is able to manufacture
quality products at its factory in China. IDN warrants that the Products
will meet the users requirement on the functionality of Set Top Box.
2.2 IDN shall make sales of four million Set Top Box for Cirmaker in China and
the total price is approximately US $200 million. Depend on actual
situation of the locality, the Products price will be regulated in a
separate product-ordering contract by both parties. IDN assures that
Cirmaker will attain minimum 20% profit before tax from the orders,
provided that Cirmaker reasonably controls its cost. IDN also agrees to
increase Products order, provided that Cirmaker meets the lead time of the
Products, as stipulated in Chart 1 of Section 2.2.
No. Lead Time Quantity Note
- ---------------------------------------
1 June 30, 2003 3000 pcs
- ---------------------------------------
2 December 31, 2003 97,000 pcs
- ---------------------------------------
3 June 30, 2004 200,000 pcs
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4 December 31, 2004 400,000 pcs
- ---------------------------------------
5 June 30, 2005 600,000 pcs
- ---------------------------------------
6 December 31, 2005 800,000 pcs
- ---------------------------------------
7 June 30, 200 900,000 pcs
- ---------------------------------------
8 December 31, 2006 1,000,000 pcs
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Total: 4,000,000 pcs
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2.3 Cirmaker shall set up factory in China for Products manufacturing, quality
control, budget control, on time delivery and be responsible for product
repair, return and maintenance.
2.4 Cirmaker shall also provide entire cash funding for Products
manufacturing and marketing.
3. Investment
3.1 Cirmaker shall invest IDN or IDN funded company outside of China (IDN
affiliate) a total of US $25 million for the development of digital cable
TV service. The investment deadline is as follows:
a. Payment of US$473,310.00 in 2002 to purchase 157,770 common stock from
IDN's shareholder in exchange of 3% of IDN's share:
b. Invest US$1,526,690.00 in the first half of 2003.
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c. Invest US$3,000,000.00 in the second half of 2003;
d. Invest US$20,000,000.00 in 2004
Investment b, c and d will be made directly to IDN or IDN affiliate.
Cirmaker shall receive either 25% of IDN shares or 45% of IDN
affiliate's share.
3.2 To aid Cirmaker in the competition of bidding Set Top Box, IDN has
particularly arranged Cirmaker to acquire 157,770 shares of IDN with a
total price of US$473,310.00 (equals to 3% of IDN shares). Cirmaker shall
complete this stock transaction within two weeks following the signature of
this Agreement and IDN shall issue stock certificate to Cirmaker
immediately upon completion of the stock transaction.
3.3 Either IDN or IDN affiliate that Cirmaker makes the investment to shall
complete IPO outside of China market within three years and either IDN or
IDN affiliate will not utilize sales and manufacture of Set Top Box as its
IPO business resource. Cirmaker shall complete IPO within two years and
include sales and manufacture of Set Top Box as part of IPO business
resources.
3.4 In the event that Cirmaker invests to IDN, Cirmaker's share percentage of
IDN before IPO shall be 25%. In the event that Cirmaker invests to IDN
affiliate, Cirmaker's share percentage of IDN affiliate before IPO shall be
45%.
4. Support and Warrants
4.1 Both parties shall exert its best effort to assist the other party and
support its IPO funding planning.
4.2 Either IDN or IDN affiliate that receives Cirmaker's investment shall
devote the funding strictly to the development of China and international
digital cable TV head end system, transmission network services and Set Top
Box users market, as well as IPO and regular operation purpose.
5. Others
5.1 Unless force majeure has taken place, any disputes arising out of or in
connection with the Agreement, including breach of contact or entanglement,
shall be settled through friendly negotiation. Shall either party severally
breach the Agreement and hinder the performance of the Agreement, the other
party has the right to terminate the Agreement. The breaching party shall
compensate any losses to the other party. Should no settlement be reached
through negotiation, the Agreement shall be construed in accordance with
the laws of California and the location for litigation shall be in
California, U.S.A.
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5.2 The Agreement is made out of two languages, Chinese and English, in four
copies. Each party shall keep two copies. In the event of interpretation
conflict, English version shall prevail.
5.3 Both parties shall keep this Agreement in strict confidence. Nothing in the
Agreement shall be disclosed to any third party without the written consent
of the other party.
IDN Telecom, Inc. Cirmaker Industry Co., Ltd.
/s/ George Wu /s/ Liao Shih Yi
- ------------------------------- ------------------------
Print name: Print name:
George Wu Liao Shih Yi
December ____, 2002 December ____, 2002
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