FUHWA BANK

ACKNOWLEDGEMENT OF INDEBTEDNESS
FOR A
LOAN EXTENSION
(USED FOR DEMAND LOAN)

Customer Number: 11589

This Acknowledgement of Indebtedness (“I.O.U.”) is executed by Kidcastle
Internet Technology Co. Ltd. (the “Borrower”) for a loan extended by Fuhwa Bank
(including its headquarter and all branches) (the “Bank”). The Borrower invites
the joint and several guarantor(s) to provide a guarantee to jointly and
severally guarantee the Borrower’s performance of the obligations under the
I.O.U. and agrees to the following terms and conditions:

【GENERAL TERMS AND CONDITIONS】

ARTICLE 1:

The amount of credit extended is: NT$10,000,000 (the “Loan”)

ARTICLE 2:

The Loan is deemed to have been received by the Borrower when the Loan is
remitted to the account that the Borrower has opened in the Bank or is
transferred to be used for the purpose designated by the Borrower.

ARTICLE 3:

This Loan can be drawdown by different tranches on a revolving basis. Each
revolving period and repayment methods are as follow:

1.
The revolving period shall commence from August 5, 2005 and end on August 4,
2006.

 
 
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2.
Within the agreed period, the Loan shall be drawn down by Borrower’s submission
of the drawdown requests within the agreed amount. The term of each tranche that
has been drawdown shall not exceed 6 months. The Borrower shall repay the fund
of each tranche within the above period.

ARTICLE 4:

The Borrower and the joint and several guarantor(s) shall be jointly and
severally responsible for repaying all the funds that the Borrower has borrowed
from the Bank within the period provided hereunder in accordance with the terms
and conditions herein, although the day for repaying such funds is after such
period.

ARTICLE 5:

1.
The interests incurred from the borrowed funds shall be paid on a monthly basis.
The interests shall be calculated in accordance with Item (4), below:

(1)
The interest rate incurred for the Loan is calculated at the annual interest
rate of % (which is determined according to the base rate for a loan extension
at the time when the agreement of credit extension is executed plus a markup of
annual rate of %) The interests for the newly borrowed fund shall be determined
according to the base interest rate available at the time when the new fund is
borrowed plus a standard markup rate. Thereafter, when the Bank adjusts the base
interest rate, the interest rate shall be calculated according to the adjusted
base rate plus a markup of the annual floating interest rate. The markup of the
annual interest rate shall, after the execution of the agreement for credit
extension, be adjusted every three months in accordance with the Bank’s then
current “Guidelines Governing the Markup of Base Interest Rate for Credit
Extension.”

If the Bank’s base interest rate for the credit extension and/or the Guidelines
Governing the Markup of Base Interest Rate for Credit Extension as provided in
the preceding paragraph are adjusted and/or revised after the execution of the
agreement for credit extension, the Borrower agrees that the Bank may publicize
such adjusted and revised base interest rate for the credit extension and/or the
Guidelines Governing the Markup of Base Interest rate for Credit Extension in
its place of business and to be bound thereby.
 
 
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(2)
The interest rate for each tranche of the loan shall be determined by
negotiations between the Borrower and the Bank at the time of borrowing and be
calculated and paid at the agreed fixed interest rate. If the Borrower fails to
repay the principal and pay for the interests according to the agreed terms,
commencing from the day of the delay, the interest rate shall be calculated and
paid by adding 2.5% of annual rate to the base rate applied by the Bank.

(3)
The interest rate incurred for the Loan is calculated according to the
applicable base rate for a loan extension at the time of borrowing ( %) plus a
markup of annual rate of % (i.e. %). The interests for the newly borrowed fund
shall be determined according to the base interest rate available at the time
when the new fund is borrowed plus a markup rate. Thereafter, when the Bank
adjusts the base interest rate, the interest rate shall be calculated according
to the adjusted base rate plus a markup of the annual floating interest rate.

The above base interest rate applied by the Bank is the average fixed interest
rate (the exact figure shall be based upon the announcement of the Central Bank
of China) of the interest rates applied to “One-year Term Time Deposit” by 10
domestic banks + a fixed rate (risk discount of the Bank + administrative cost).

If the composition of the base interest rate provided in the preceding paragraph
is adjusted or revised after the execution of the agreement for credit
extension, the Borrower and the joint and several guarantor(s) agree that the
Bank may announce the adjusted and/or revised details in its place of business
and to be bound thereby.

Explanation:

 
(i)
The reference banks for the average fixed interest rate of the interest rates
applied to “One-year Term Time Deposit” include: The Bank of Taiwan, Taiwan
Cooperative Bank, The Land Bank, The First Bank, Chang Hwa Bank, Hua Nan Bank,
Taiwan Business Bank, Cathay United Bank, The International Commercial Bank of
China and Taipei Bank.

 
 
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(ii)
The periods of sampling, interest rate adjustment dates and periods of
application are as below:

Period of sampling
Interest rate adjustment date
Period of application
2/16 - 2/22
2/23
2/24 - 5/23
5/16 - 5/22
5/23
5/24 - 8/23
8/16 - 8/22
8/23
8/24 - 11/23
11/16 - 11/22
11/23
11/24 - 2/23

Note:
(A) The data shall be based upon the data announced by the Central Bank of China
at 11:30 AM of that current day. (B) Indexes shall only allow two numbers after
the decimal point. The third number after the decimal point, if it is bigger
than or equal to 5, shall be rounded up, and if it is smaller than or equal to
4, shall be rounded down.

 
(iii)
At present, the average fixed interest rate of the interest rates applied by 10
domestic banks to “One-year Term Time Deposit” is %.

 
(iv)
Under the following circumstances, the Borrower and the joint and several
guarantor(s) agree that the Bank has the absolute right and at its sole
discretion to change the reference banks providing the composition of the
indexes for the base interest rate and separately designate another domestic
bank to substitute:

(A)
The reference bank merges with other bank, is merged into other bank, is
extinguished, suspends the business, closes the business, is re-organized; or
any event under Article 62 of the Banking Law, which includes: being ordered to
suspend the business, being put under custody, being effected a mandatory
takeover, etc. occurs to the reference bank.

(B)
The short-term credit rating of the reference bank is lower than Taiwan ratings.

(C)
The reference bank ceases selling one-year-term time deposit products.

 
 
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(4) The interests are collected based on a flexible rate calculated according to
the following formula: The index of the time deposit of the Bank õ 7.29û (i.e.
the annual interest rate of 5 û). 
 
ARTICLE 6:

If the Borrower fails to repay the principal and the interests according to the
I.O.U., the Borrower agrees to pay for the delay interest rate calculated
according to the interest rate applicable to this Loan for the delayed principal
amount. The Borrower further agrees to pay for penalties calculated according to
the following formula for the delayed payment for the principal and the
interests: The penalty for the delayed payment for the principal shall be
calculated from the maturity date and that for the delayed payment of the
interests shall be calculated from the interests payment day at the, at the rate
of 10 % of the interest rate for this Loan for the delay period within six
months and at the rate of 20% of the interest rate for this Loan for the delay
period above six months.

ARTICLE 7:

The purpose of use of this Loan shall be limited to .

ARTICLE 8:

In order to perform the obligations owed to the Bank, the Borrower and the joint
and several guarantor(s) agree to authorize the Bank from time to time and at
the Bank’s sole discretion to deduct from the demand accounts opened by the
Borrower and/or the joint and several guarantor(s) in their names (account
number: ) any amount at the time of maturity or the time of advancement to pay
for the principal, interests, default interests, penalty advances and other
expenses (including the insurance premium for the collaterals), without the
necessary to present the passbook and the withdrawal slip.

ARTICLE 9:

The term “obligation” or “all obligations” referred to hereunder shall mean the
loan, instruments, advances, guarantee, overdraft and other obligations,
including but not limited to interests, default interests, penalty, compensation
of damages, the insurance premium, expenses for executing mortgages, expenses to
obtain an enforcement title and other related expenses.

 
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ARTICLE 10:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals agree that the Joint Credit Information Center and its member
financial institutions, Clearing Houses, Small and Medium Business Credit
Guarantee Fund, National Credit Card Center, Financial Information Service Co.,
Ltd., the assignees/transferees of the Bank’s obligations/rights hereunder and
the participants (or the entity which plans to be assigned/transferred) in the
Loan, the person auditing the appraisal of the value of the debts or any agent
appointed by the Bank to handle the outsourced work, or other domestic or
overseas institutions handling financial affairs (including SWIFT) and other
relevant institutions corresponding with the Bank, may collect, proceed with
computer processing on, conduct international transmission of, use and provide
to each other the following information and data of the Borrower, joint and
several guarantor(s) and provider of the collaterals:

Credit reports, credit extension data (including overdue, collection and bad
debts records), deposits data, financial data, collaterals and other movables or
real property information, credit information regarding the instruments, credit
cards (including IC Cards and magnetic cards)credit card information, credit
information in the credit card merchants and other personal information relating
to the credit extension or transactions.

The computer processing of such data and information and the period of the use
in relevant institutions shall be the approved period of preservation for such
files and data which relevant institutions applied with the competent
authorities for registration.

The Borrower agrees that the Bank may from time to time monitor the Borrower’s
use of the Loan extended to the Borrower and the business and financial status
of the Borrower, examine/custody the collaterals, examine relevant accounts and
books, statements (including the consolidated financial statements of the
affiliates), check and review certificates, slips and documents. When the Bank
deems necessary, the Bank may request the Borrower to fill out the requested
information and deliver the requested data and information to the bank on a
regular basis, or provide to the Bank the financial statements audited by the
CPA approved by the Bank and request such CPA to provide relevant drafts of
his/her work. If the Bank considers that the financial statements or other
documents delivered by the Borrower are false, as soon as receiving the notice
from the Bank, such will be deemed as a default by the Borrower; provided,
however, the Bank does not have the obligation to monitor, audit, examine,
custody and check such statements and documents. If the Bank considers that the
Borrower’s financial structure should be improved, the Bank may demand the
Borrower to take actions to improve its financial structure. The Borrower shall
comply with such demand to improve.

 
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ARTICLE 11:

Any individual/entity holding the receipt or custody certificate issued by the
Bank or the Borrower’s chop or the receipt documents signed by the Borrower goes
to the Bank to request for returning or replacing the collaterals and the
documents related thereto shall be deemed as the agent of the Borrower. The Bank
may approve to return or replace.

ARTICLE 12:

If the obligations hereunder are covered by the collaterals obtained from the
extension of this Loan or from other credit extensions, except for complying
with the terms and conditions set forth in the respective collaterals
agreements, the Borrower shall comply with the following provisions:

1.
For the collaterals which are insurable, the Borrower and the provider of such
collaterals shall in each year procure appropriate fire insurance (including
earthquake insurance) or other insurance coverage required by the Bank for the
collaterals form the insurance company for the period starting from the
commencement of the term of the Loan and ending on the day that the Loan is
repaid. In such insurances, the Borrower shall include the Bank as the mortgagee
to apply with the insurance company to add special terms and conditions for the
mortgage. The insured amount and the terms and conditions of the insurance
policies shall be approved by the Bank. The Borrower and the collaterals
provider shall be jointly and severally responsible for paying the insurance
premium and other related costs. The original copy of the insurance policy and
the photocopy of the receipt for the insurance premium shall be kept by the
Bank. If the Borrower and the collaterals provider forget to procure the
insurance or renew the insurance, the Bank may use this I.O.U. as an
authorization letter to procure/renew the insurance on their behalf. If the Bank
has advanced the insurance premium, the Borrower and the collaterals provider
shall repay the advanced fund immediately. If the Borrower and the collaterals
provider fail to repay the advanced fund immediately, the Bank may add such
advanced fund into the mount owed by the Borrower and collect interests incurred
thereon according to the interest rate provided hereunder. However, the Bank
does not have the obligation to procure or renew he insurance policy or pay for
the insurance premium. If unfortunately the insured collaterals are damages,
lost or destroyed and the insurance company refuses or delays to pay for the
compensation for the damages which the insurance company is required to pay for
whatever reasons, the Bank may set a certain period of time to request the
Borrower to provide a security approved by the Bank having the value equal to
the reduced value of such collaterals within such time period. If the Borrower
fails to provide such a security within the set time period, the Bank is
entitled to request the Borrower to repay the debts immediately.

 
 
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2.
If the payment made by the Borrower or the payment made though automatic
transfer from the Borrower’s account according to the agreement is insufficient
to repay all of the overdue loan owed by the Borrower, the collaterals shall be
used to set off against the various expenses (including the insurance premium
for the collaterals advanced by the Bank), penalty, interests, delay interests
and the principal in the same order.

3.
The Bank’s headquarter and all of its branches may share and exercise the rights
over the collaterals provided by the Borrower and/or the collaterals provider
hereunder, irrespective of whether their rights are created earlier or later, to
obtain guarantee from such collaterals to secure the present debts (including
those already occurred but not being repaid and not limited to the total amount
of credit extension agreed hereunder) and future debts owed by the Borrower in
the form of instruments, loans, advances, insurances and all other debts,
together with the incurred interests, delay interests, penalties, damages and
all of the expenses required for performing the obligations of the above debts.

ARTICLE 13:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), the Bank may from time to time reduce the extended
credit amount or shorten the period of the credit extension without the
necessity to send any prior notice or demand for a correction or remedial action
in the first place:

 
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1.
Failing to repay the principal for any indebtedness according to the agreement.

2.
The Borrower and/or the joint and several guarantor(s) file for reconciliation
or is declared bankruptcy according to the Bankruptcy Act, apply for
reorganization according to eh Company Law, are declared by the clearing houses
to be a company/individual with which the transactions are rejected, suspend the
business operation or proceed a debt arrangement..

3.
The Borrower and/or the joint and several guarantor(s) have the obligation to
provide guarantees according to the original agreement, but fail to provide such
guarantees.

4.
The Borrower and/or the joint and several guarantor(s) die and their heirs
declare a limited inheritance or waive their rights to inherit.

5.
The Borrower and/or the joint and several guarantor(s) are declared a
confiscation of their major properties in criminal cases.

ARTICLE 14:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), after the Bank has given a notice or demand within a
reasonable period, the Bank may reduce the extended credit amount or shorten the
period of the credit extension or treat all of the loan as matured:

1.
The interests incurred on any debt are not paid.

2.
The collateral is foreclosed or the collateral is lost, or the value of which is
reduced or is insufficient to secure the obligations.

3.
The actual use of the fund obtained from the loan extended by the Bank does not
conform to the purpose of use selected by the Bank.

4.
The Borrower and/or the joint and several guarantor(s) are subject to compulsory
execution, provisional attachment, provisional measures or other protecting
measures, which has made the Bank to face a threat that the debt may not be
repaid.

 
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ARTICLE 15:

If the Bank transfers/assigns all or part of the rights claimable by the Bank
according to the I.O.U. (including the rights to claim against the Borrower and
the joint and several guarantor(s) to pay for the interests and the repay the
loan), together with the mortgages and insurance benefits the Bank obtained
according to the agreement, to a third party, it is the Bank or the
transferee/assignee’s obligation to notify the Borrower. After the Borrower, the
joint and several guarantor(s) and collaterals provider agreed to such
transfer/assignment and the Bank or the transferee/assignee has notified the
Borrower, if any changes of the mortgages registration or the beneficiary under
the insurance contract are required due to such transfer/assignment, they shall
cooperate to change the mortgages registration and/or the beneficiary without
any objection.

If such transfer/assignment is for securitizing the Bank’s financial assets or
the transferee/assignee is an asset management company, the notice stated in the
preceding paragraph can be replaced by public announcement.

ARTICLE 16:

The Bank may exercise the rights of set-off against the various funds deposited
by the Borrower and the joint and several guarantor(s) in the Bank (including
the deposits in the checking accounts which have been suspended according to the
agreement) and all the rights claimable against the Bank, whether or not such
funds and/or rights have matured.

The expression of intention to exercise the right of set-off as provided in the
preceding paragraph shall become effective as soon as the Bank records such
set-off and deduction on its books and accounts. In the meantime, the deposit
slips, the passbook and other certificates shall, within the set-off amount,
loose their effect.

ARTICLE 17:

If the debt certificates evidencing the various debts owed by the Borrower and
the joint and several guarantor(s) are lost, destroyed or damaged, unless the
amounts stated on the Bank’s accounts and books, vouchers, computer generated
certificates/slips, debt certificates and micro-copies of the correspondences
are proved by the Borrower and the joint and several guarantor(s) to be
erroneous and the Bank shall immediately correct such errors, the Borrower and
the joint and several guarantor(s) shall admit the full amounts stated thereon
and, when such amounts mature, immediately pay for various expenses incurred for
such amounts, penalties and the principal and interests, or at the Bank’s
request issue another debt certificates before the maturity to the Bank for the
Bank’s safe-keeping.

 
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ARTICLE 18:

In the event that the Borrower changes its name, organization, contents of its
articles of association, seal/chop, representative, scope of authority delegated
to the representative, or the occurrence of any event which may affect the
rights and interests of the Bank, the Borrower shall immediately notify the Bank
in writing of such events and complete the procedures of change or cancel the
seal/chop specimen kept in the Bank.

The Borrower and the joint and several guarantor(s) shall be responsible for the
transactions conducted before sending the notice and completing the procedures
as provided in the preceding paragraph and compensate the Bank for any damages
it has suffered which were resulted thereof.

ARTICLE 19:

In the event that the Borrower and the joint and several guarantor(s) change
their addresses, Borrower and the joint and several guarantor(s) shall
immediately notify the Bank. If Borrower and the joint and several guarantor(s)
fail to send the above notice and the Bank sends relevant documents to the
addresses provided hereunder or to the last addresses notified by the Borrower
and the joint and several guarantor(s), such documents shall be deemed to have
been served upon the Borrower and the joint and several guarantor(s) at the
expiry of the traveling period normally required by the post office.

ARTICLE 20:

The requirements, effects and the formalities of the legal action for the
creation of the debts incurred to the Borrower and the joint and several
guarantor(s) based upon this I.O.U. shall be governed by the laws of the
Republic of China.

 
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ARTICLE 21:

The place for performing the obligation hereunder shall be the business place of
the Bank. Any disputes arising out of or in connection with this I.O.U. shall be
subject to the Taipei District Of Taiwan for the first instance; provided,
however, if the law mandates a court to have exclusive jurisdiction over such
dispute, such mandated exclusive jurisdiction shall prevail.

ARTICLE 22:
Any matters not provided for in this I.O.U. shall be negotiated by the Borrower
and the joint and several guarantor(s) with the Bank separately.

【SPECIAL TERMS AND CONDITIONS】

ARTICLE 1:

In the event that any amount deposited by the Borrower and the joint and several
guarantor(s) in the Bank is attached or frozen by other person according to the
law, the Bank may from time to time reduce the extended credit amount or shorten
the period of the credit extension or deem all of the debts as matured, without
the necessity to send any prior notice or demand for a correction or remedial
action in the first place:

1.
The checks issued by the Borrower and the joint and several guarantor(s) are
bounced due to insufficient fund deposit; or the checks prepared for making the
payment as provided by them are rejected after being presented for payment.

2.
The debts owed by the Borrower and the joint and several guarantor(s) to other
financial institutions are overdue and not paid.

3.
The occurrence of matters that are against the principles of good faith, such as
there exist false statements or omission of statements in the financial
statements or other data/documents delivered by the Borrower and the joint and
several guarantor(s) to the Bank.

4.
The Borrower and the joint and several guarantor(s) fail to perform or violate
the written agreements reached with the Bank or the promises.

 
 
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5.
The certificates, licenses or approvals required by relevant programs under the
I.O.U. are suspended, canceled or revoked for certain reasons.

6.
The chattels over which the mortgages are created in favor of the Bank have been
removed, sold, transferred or subject to other disposal measures.

7.
Failing to honor the promise made when entering into the contract to build the
factory according to the promised speed.

ARTICLE 2:

Unless the Bank agrees in writing, the Borrower and the collaterals provider
shall not sell (or transfer, lease out or lend) the collaterals, or create any
encumbrances over such collaterals or, if the collateral is an empty land),
build any illegal buildings on the unoccupied land where the mortgage is
created. In case of any violation of the above provisions, the Bank may set a
certain time period to request the Borrower or the collaterals provider to
provide another collateral of the same value approved by the Bank or request the
Borrower to settle the debts within the set time period and compensate all of
the damages suffered by the Bank as a result.

ARTICLE 3:

Before the Borrower repays all of the debts incurred hereon, if the Bank based
upon the Borrower’s request considers there is a need to extend the repayment
schedule or allow the debts to be repaid by installments, the Bank shall
immediately notify the joint and several guarantor(s) in writing. The joint and
several guarantor(s) agree to continue to bear the joint and several guarantee
liability when the written notice from the Bank has arrived or is deemed to have
been served upon such joint and several guarantor(s).

ARTICLE 4:

The Bank is authorized to apply with the tax offices to check the tax
information and properties of the Borrower and the joint and several
guarantor(s), if any events provided in Article hereof has occurred to them.

 
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ARTICLE 5:

The Bank and the joint and several guarantor(s) agree that the Bank may
outsource the work to collect the debts owed by them to the bank to a third
party.

ARTICLE 6:

If the Bank and the joint and several guarantor(s) fail to provide sufficient
collaterals for the credit extension for this Loan, the property the information
of which had been provided by the Bank and/or the joint and several guarantor(s)
to the Bank for documentary review before applying for the credit extension
shall not be used to create a trust.

ARTICLE 7:

The scope and amounts of the debts guaranteed by the collaterals which are
provided by the collaterals provider to the Bank to create mortgages, together
with the period of the mortgages, shall not be affected by the transfer of the
collaterals pursuant to a trust.

ARTICLE 8:

The joint and several guarantor(s) shall be responsible for repaying all the
debts owed by the Borrower hereunder jointly and severally with the Borrower.
Each joint and several guarantor(s) shall also be individually repaying all the
debts owed by the Borrower hereunder. The joint and several guarantor(s) further
agree to the following:

1.
The Bank is entitled to claim against the joint and several guarantor(s) for
repayment of the debts before seeking to be paid from the collaterals.

2.
After the joint and several guarantor(s) repaid the debts for the Borrower and
request the Bank to transfer the collaterals according to applicable laws, the
joint and several guarantor(s) shall not raise any objection to contend that the
rights to the collaterals are defective.

3.
The guarantor(s) shall be jointly and severally responsible for repaying all of
the debts owed by the Borrower hereunder. Such responsibility shall not be
affected by the fact that the Bank releases any or several joint and several
guarantor(s)’ liabilities or agree to replace any or several joint and several
guarantor(s) with others. Also, such responsibility shall not be discharged by
the fact that the instruments, notes or other relevant documents and
certificates issued by the Borrower hereunder have not been signed by the
guarantor(s).

 
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The Borrower, the joint and several guarantor(s) and the provider of the
collaterals hereby declare that the Article of the above SPECIAL TERMS AND
CONDITIONS has been reviewed article by article and stamp their chops as below:

Borrower:

Kidcastle Internet Technology Co. Ltd.
Responsible Person: Wang, Kuo An
Joint and several guarantor(s): Wang, Kuo An
Joint and several guarantor(s): Chiu, Yu En
Joint and several guarantor(s):
Provider of the collaterals: Wang, Kuo An

TO: FUHWA BANK:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals hereby represent that they have reviewed all of the terms and
conditions contained in this I.O.U. within a reasonable period of time, have
fully understood its contents and agree to execute this I.O.U. as below.

Borrower: Kidcastle Internet Technology Co. Ltd.
Responsible person: Wang, Kuo An
Address: 1st Fl., 148, Chien Kuo Rd., Hsin Dian City

 
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Joint and several guarantor(s): Wang, Kuo An
Address: 2nd Fl., 299, Si Yuan Rd., 10 Lin, Chung Shan Borough, Hsin Dian City,
Taipei County

Joint and several guarantor(s): Chiu, Yu En
Address: No. 71, Nan Chang Rd., Section 1, Long Fu Borough, Chung Shan District,
Taipei

Joint and several guarantor(s):
Address:

Joint and several guarantor(s):
Address:

Date: August 5, 2005
 
 
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FUHWA BANK

ACKNOWLEDGEMENT OF INDEBTEDNESS
FOR A
LOAN EXTENSION
(USED FOR FIXED-TERM LOAN)

Customer Number: 11589

This Acknowledgement of Indebtedness (“I.O.U.”) is executed by Kidcastle
Internet Technology Co. Ltd. (the “Borrower”) for a loan extended by Fuhwa Bank
(including its headquarter and all branches) (the “Bank”). The Borrower invites
the joint and several guarantor(s)(s) to provide a guarantee to jointly and
severally guarantee the Borrower’s performance of the obligations under the
I.O.U. and agrees to the following terms and conditions:

【GENERAL TERMS AND CONDITIONS】

ARTICLE 1:

The amount of the credit extended is: NT$7,000,000 (the “Loan”)

ARTICLE 2:

The term of the Loan is provided and the methods of repayment shall be made in
accordance with Section of this Article:

1.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the interest incurred on the Loan shall be paid by monthly. The total
principal shall be repaid at the maturity.

2.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the principal shall be divided into installments. The first
installment starts from _______. Thereafter, every month(s) is counted as one
installment. The principal shall be repaid according to the installments.
Interests shall be paid by monthly.

 
 
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3.
The term of the Loan is 5 years (0 months), commencing from August 10, 2005 to
August 10, 2008. After the borrowing, the Loan shall be divided into 60
installments and the principal and interests thereon be repaid on the 10th day
of each according to the annuity method.

4.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the first ____ years are the grace period and the interests shall be
paid monthly. Commencing from the year, the Loan shall be divided into
installments and the principal and interests thereon be repaid on the 10th day
of each according to the annuity method.

ARTICLE 3:

1.
The interests incurred from the borrowed funds shall be paid on a monthly basis.
The interests shall be calculated in accordance with Item 3, below:

(1)
The interest rate incurred for the Loan is calculated at the annual interest
rate of % (which is determined according to the base rate for a loan extension
at the time when the agreement of credit extension is executed plus a markup of
annual rate of %) The interests for the newly borrowed fund shall be determined
according to the base interest rate available at the time when the new fund is
borrowed plus a standard markup rate. Thereafter, when the Bank adjusts the base
interest rate, the interest rate shall be calculated according to the adjusted
base rate plus a markup of the annual floating interest rate. The markup of the
annual interest rate shall, after the execution of the agreement for credit
extension, be adjusted every three months in accordance with the Bank’s then
current “Guidelines Governing the Markup of Base Interest Rate for Credit
Extension.”

If the Bank’s base interest rate for the credit extension and/or the Guidelines
Governing the Markup of Base Interest Rate for Credit Extension as provided in
the preceding paragraph are adjusted and/or revised after the execution of the
agreement for credit extension, the Borrower agrees that the Bank may publicize
such adjusted and revised base interest rate for the credit extension and/or the
Guidelines Governing the Markup of Base Interest rate for Credit Extension in
its place of business and to be bound thereby.

 
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(2)
The interest rate for each tranche of the loan shall be determined by
negotiations between the Borrower and the Bank at the time of borrowing and be
calculated and paid at the agreed fixed interest rate. If the Borrower fails to
repay the principal and pay for the interests according to the agreed terms,
commencing from the day of the delay, the interest rate shall be calculated and
paid by adding 2.5% of annual rate to the base rate applied by the Bank.

(3)
The interest rate incurred for the Loan is calculated according to the
applicable base rate for a loan extension at the time of borrowing ( %) plus a
markup of annual rate of % (i.e. %). The interests for the newly borrowed fund
shall be determined according to the base interest rate available at the time
when the new fund is borrowed plus a markup rate. Thereafter, when the Bank
adjusts the base interest rate, the interest rate shall be calculated according
to the adjusted base rate plus a markup of the annual floating interest rate.

The above base interest rate applied by the Bank is the average fixed interest
rate (the exact figure shall be based upon the announcement of the Central Bank
of China) of the interest rates applied to “One-year Term Time Deposit” by 10
domestic banks + a fixed rate (risk discount of the Bank + administrative cost).

If the composition of the base interest rate provided in the preceding paragraph
is adjusted or revised after the execution of the agreement for credit
extension, the Borrower and the joint and several guarantor(s) agree that the
Bank may announce the adjusted and/or revised details in its place of business
and to be bound thereby.

Explanation:

 
(i)
The reference banks for the average fixed interest rate of the interest rates
applied to “One-year Term Time Deposit” include: The Bank of Taiwan, Taiwan
Cooperative Bank, The Land Bank, The First Bank, Chang Hwa Bank, Hua Nan Bank,
Taiwan Business Bank, Cathay United Bank, The International Commercial Bank of
China and Taipei Bank.

 
 
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(ii)
The periods of sampling, interest rate adjustment dates and periods of
application are as below:

Period of sampling
Interest rate adjustment date
Period of application
2/16 - 2/22
2/23
2/24 - 5/23
5/16 - 5/22
5/23
5/24 - 8/23
8/16 - 8/22
8/23
8/24 - 11/23
11/16 - 11/22
11/23
11/24 - 2/23

Note:
(A) The data shall be based upon the data announced by the Central Bank of China
at 11:30 AM of that current day. (B) Indexes shall only allow two numbers after
the decimal point. The third number after the decimal point, if it is bigger
than or equal to 5, shall be rounded up, and if it is smaller than or equal to
4, shall be rounded down.

 
(iii)
At present, the average fixed interest rate of the interest rates applied by 10
domestic banks to “One-year Term Time Deposit” is %.

 
(iv)
Under the following circumstances, the Borrower and the joint and several
guarantor(s) agree that the Bank has the absolute right and at its sole
discretion to change the reference banks providing the composition of the
indexes for the base interest rate and separately designate another domestic
bank to substitute:

(A)
The reference bank merges with other bank, is merged into other bank, is
extinguished, suspends the business, closes the business, is re-organized; or
any event under Article 62 of the Banking Law, which includes: being ordered to
suspend the business, being put under custody, being effected a mandatory
takeover, etc. occurs to the reference bank.

(B)
The short-term credit rating of the reference bank is lower than Taiwan ratings.

(C)
The reference bank ceases selling one-year-term time deposit products.

 
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(4) The interests are collected based on a flexible rate calculated according to
the following formula: The index of the time deposit of the Bank õ 7.29û (i.e.
the annual interest rate of 5û). 
 
ARTICLE 4:

If the Borrower fails to repay the principal and the interests according to the
I.O.U., the Borrower agrees to pay for the delay interest rate calculated
according to the interest rate applicable to this Loan for the delayed principal
amount. The Borrower further agrees to pay for penalties calculated according to
the following formula for the delayed payment for the principal and the
interests: The penalty for the delayed payment for the principal shall be
calculated from the maturity date and that for the delayed payment of the
interests shall be calculated from the interests payment day at the, at the rate
of 10 % of the interest rate for this Loan for the delay period within six
months and at the rate of 20% of the interest rate for this Loan for the delay
period above six months.

ARTICLE 5:

The purpose of use of this Loan shall be limited to .

ARTICLE 6:

In order to perform the obligations owed to the Bank, the Borrower and the joint
and several guarantor(s) agree to authorize the Bank from time to time and at
the Bank’s sole discretion to deduct from the demand accounts opened by the
Borrower and/or the joint and several guarantor(s) in their names (account
number: ) any amount at the time of maturity or the time of advancement to pay
for the principal, interests, default interests, penalty advances and other
expenses (including the insurance premium for the collaterals), without the
necessary to present the passbook and the withdrawal slip.

 
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ARTICLE 7:

The term “obligation” or “all obligations” referred to hereunder shall mean the
loan, instruments, advances, guarantee, overdraft and other obligations,
including but not limited to interests, default interests, penalty, compensation
of damages, the insurance premium, expenses for executing mortgages, expenses to
obtain an enforcement title and other related expenses.

ARTICLE 8:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals agree that the Joint Credit Information Center and its member
financial institutions, Clearing Houses, Small and Medium Business Credit
Guarantee Fund, National Credit Card Center, Financial Information Service Co.,
Ltd., the assignees/transferees of the Bank’s obligations/rights hereunder and
the participants (or the entity which plans to be assigned/transferred) in the
Loan, the person auditing the appraisal of the value of the debts or any agent
appointed by the Bank to handle the outsourced work, or other domestic or
overseas institutions handling financial affairs (including SWIFT) and other
relevant institutions corresponding with the Bank, may collect, proceed with
computer processing on, conduct international transmission of, use and provide
to each other the following information and data of the Borrower, joint and
several guarantor(s) and provider of the collaterals:

Credit reports, credit extension data (including overdue, collection and bad
debts records), deposits data, financial data, collaterals and other movables or
real property information, credit information regarding the instruments, credit
cards (including IC Cards and magnetic cards)credit card information, credit
information in the credit card merchants and other personal information relating
to the credit extension or transactions.

The computer processing of such data and information and the period of the use
in relevant institutions shall be the approved period of preservation for such
files and data which relevant institutions applied with the competent
authorities for registration.

The Borrower agrees that the Bank may from time to time monitor the Borrower’s
use of the Loan extended to the Borrower and the business and financial status
of the Borrower, examine/custody the collaterals, examine relevant accounts and
books, statements (including the consolidated financial statements of the
affiliates), check and review certificates, slips and documents. When the Bank
deems necessary, the Bank may request the Borrower to fill out the requested
information and deliver the requested data and information to the bank on a
regular basis, or provide to the Bank the financial statements audited by the
CPA approved by the Bank and request such CPA to provide relevant drafts of
his/her work. If the Bank considers that the financial statements or other
documents delivered by the Borrower are false, as soon as receiving the notice
from the Bank, such will be deemed as a default by the Borrower; provided,
however, the Bank does not have the obligation to monitor, audit, examine,
custody and check such statements and documents. If the Bank considers that the
Borrower’s financial structure should be improved, the Bank may demand the
Borrower to take actions to improve its financial structure. The Borrower shall
comply with such demand to improve.

 
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ARTICLE 9:

Any individual/entity holding the receipt or custody certificate issued by the
Bank or the Borrower’s chop or the receipt documents signed by the Borrower goes
to the Bank to request for returning or replacing the collaterals and the
documents related thereto shall be deemed as the agent of the Borrower. The Bank
may approve to return or replace.

ARTICLE 10:

If the obligations hereunder are covered by the collaterals obtained from the
extension of this Loan or from other credit extensions, except for complying
with the terms and conditions set forth in the respective collaterals
agreements, the Borrower shall comply with the following provisions:

1.
For the collaterals which are insurable, the Borrower and the provider of such
collaterals shall in each year procure appropriate fire insurance (including
earthquake insurance) or other insurance coverage required by the Bank for the
collaterals form the insurance company for the period starting from the
commencement of the term of the Loan and ending on the day that the Loan is
repaid. In such insurances, the Borrower shall include the Bank as the mortgagee
to apply with the insurance company to add special terms and conditions for the
mortgage. The insured amount and the terms and conditions of the insurance
policies shall be approved by the Bank. The Borrower and the collaterals
provider shall be jointly and severally responsible for paying the insurance
premium and other related costs. The original copy of the insurance policy and
the photocopy of the receipt for the insurance premium shall be kept by the
Bank. If the Borrower and the collaterals provider forget to procure the
insurance or renew the insurance, the Bank may use this I.O.U. as an
authorization letter to procure/renew the insurance on their behalf. If the Bank
has advanced the insurance premium, the Borrower and the collaterals provider
shall repay the advanced fund immediately. If the Borrower and the collaterals
provider fail to repay the advanced fund immediately, the Bank may add such
advanced fund into the mount owed by the Borrower and collect interests incurred
thereon according to the interest rate provided hereunder. However, the Bank
does not have the obligation to procure or renew he insurance policy or pay for
the insurance premium. If unfortunately the insured collaterals are damages,
lost or destroyed and the insurance company refuses or delays to pay for the
compensation for the damages which the insurance company is required to pay for
whatever reasons, the Bank may set a certain period of time to request the
Borrower to provide a security approved by the Bank having the value equal to
the reduced value of such collaterals within such time period. If the Borrower
fails to provide such a security within the set time period, the Bank is
entitled to request the Borrower to repay the debts immediately.

 
 
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2.
If the payment made by the Borrower or the payment made though automatic
transfer from the Borrower’s account according to the agreement is insufficient
to repay all of the overdue loan owed by the Borrower, the collaterals shall be
used to set off against the various expenses (including the insurance premium
for the collaterals advanced by the Bank), penalty, interests, delay interests
and the principal in the same order.

3.
The Bank’s headquarter and all of its branches may share and exercise the rights
over the collaterals provided by the Borrower and/or the collaterals provider
hereunder, irrespective of whether their rights are created earlier or later, to
obtain guarantee from such collaterals to secure the present debts (including
those already occurred but not being repaid and not limited to the total amount
of credit extension agreed hereunder) and future debts owed by the Borrower in
the form of instruments, loans, advances, insurances and all other debts,
together with the incurred interests, delay interests, penalties, damages and
all of the expenses required for performing the obligations of the above debts.

ARTICLE 11:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), the Bank may from time to time reduce the extended
credit amount or shorten the period of the credit extension without the
necessity to send any prior notice or demand for a correction or remedial action
in the first place:

1.
Failing to repay the principal for any indebtedness according to the agreement.

 
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2.
The Borrower and/or the joint and several guarantor(s) file for reconciliation
or is declared bankruptcy according to the Bankruptcy Act, apply for
reorganization according to eh Company Law, are declared by the clearing houses
to be a company/individual with which the transactions are rejected, suspend the
business operation or proceed a debt arrangement..

3.
The Borrower and/or the joint and several guarantor(s) have the obligation to
provide guarantees according to the original agreement, but fail to provide such
guarantees.

4.
The Borrower and/or the joint and several guarantor(s) die and their heirs
declare a limited inheritance or waive their rights to inherit.

5.
The Borrower and/or the joint and several guarantor(s) are declared a
confiscation of their major properties in criminal cases.

ARTICLE 12:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), after the Bank has given a notice or demand within a
reasonable period, the Bank may reduce the extended credit amount or shorten the
period of the credit extension or treat all of the loan as matured:

1.
The interests incurred on any debt are not paid.

2.
The collateral is foreclosed or the collateral is lost, or the value of which is
reduced or is insufficient to secure the obligations.

3.
The actual use of the fund obtained from the loan extended by the Bank does not
conform to the purpose of use selected by the Bank.

4.
The Borrower and/or the joint and several guarantor(s) are subject to compulsory
execution, provisional attachment, provisional measures or other protecting
measures, which has made the Bank to face a threat that the debt may not be
repaid.

 
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ARTICLE 13:

If the Bank transfers/assigns all or part of the rights claimable by the Bank
according to the I.O.U. (including the rights to claim against the Borrower and
the joint and several guarantor(s) to pay for the interests and the repay the
loan), together with the mortgages and insurance benefits the Bank obtained
according to the agreement, to a third party, it is the Bank or the
transferee/assignee’s obligation to notify the Borrower. After the Borrower, the
joint and several guarantor(s) and collaterals provider agreed to such
transfer/assignment and the Bank or the transferee/assignee has notified the
Borrower, if any changes of the mortgages registration or the beneficiary under
the insurance contract are required due to such transfer/assignment, they shall
cooperate to change the mortgages registration and/or the beneficiary without
any objection.

If such transfer/assignment is for securitizing the Bank’s financial assets or
the transferee/assignee is an asset management company, the notice stated in the
preceding paragraph can be replaced by public announcement.

ARTICLE 14:

The Bank may exercise the rights of set-off against the various funds deposited
by the Borrower and the joint and several guarantor(s) in the Bank (including
the deposits in the checking accounts which have been suspended according to the
agreement) and all the rights claimable against the Bank, whether or not such
funds and/or rights have matured.

The expression of intention to exercise the right of set-off as provided in the
preceding paragraph shall become effective as soon as the Bank records such
set-off and deduction on its books and accounts. In the meantime, the deposit
slips, the passbook and other certificates shall, within the set-off amount,
loose their effect.

ARTICLE 15:

If the debt certificates evidencing the various debts owed by the Borrower and
the joint and several guarantor(s) are lost, destroyed or damaged, unless the
amounts stated on the Bank’s accounts and books, vouchers, computer generated
certificates/slips, debt certificates and micro-copies of the correspondences
are proved by the Borrower and the joint and several guarantor(s) to be
erroneous and the Bank shall immediately correct such errors, the Borrower and
the joint and several guarantor(s) shall admit the full amounts stated thereon
and, when such amounts mature, immediately pay for various expenses incurred for
such amounts, penalties and the principal and interests, or at the Bank’s
request issue another debt certificates before the maturity to the Bank for the
Bank’s safe-keeping.

 
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ARTICLE 16:

In the event that the Borrower changes its name, organization, contents of its
articles of association, seal/chop, representative, scope of authority delegated
to the representative, or the occurrence of any event which may affect the
rights and interests of the Bank, the Borrower shall immediately notify the Bank
in writing of such events and complete the procedures of change or cancel the
seal/chop specimen kept in the Bank.

The Borrower and the joint and several guarantor(s) shall be responsible for the
transactions conducted before sending the notice and completing the procedures
as provided in the preceding paragraph and compensate the Bank for any damages
it has suffered which were resulted thereof.

ARTICLE 17:

In the event that the Borrower and the joint and several guarantor(s) change
their addresses, Borrower and the joint and several guarantor(s) shall
immediately notify the Bank. If Borrower and the joint and several guarantor(s)
fail to send the above notice and the Bank sends relevant documents to the
addresses provided hereunder or to the last addresses notified by the Borrower
and the joint and several guarantor(s), such documents shall be deemed to have
been served upon the Borrower and the joint and several guarantor(s) at the
expiry of the traveling period normally required by the post office.

ARTICLE 18:

The requirements, effects and the formalities of the legal action for the
creation of the debts incurred to the Borrower and the joint and several
guarantor(s) based upon this I.O.U. shall be governed by the laws of the
Republic of China.

 
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ARTICLE 19:

The place for performing the obligation hereunder shall be the business place of
the Bank. Any disputes arising out of or in connection with this I.O.U. shall be
subject to the Taipei District Of Taiwan for the first instance; provided,
however, if the law mandates a court to have exclusive jurisdiction over such
dispute, such mandated exclusive jurisdiction shall prevail.

ARTICLE 20:
Any matters not provided for in this I.O.U. shall be negotiated by the Borrower
and the joint and several guarantor(s) with the Bank separately.

【SPECIAL TERMS AND CONDITIONS】

ARTICLE 1:

In the event that any amount deposited by the Borrower and the joint and several
guarantor(s) in the Bank is attached or frozen by other person according to the
law, the Bank may from time to time reduce the extended credit amount or shorten
the period of the credit extension or deem all of the debts as matured, without
the necessity to send any prior notice or demand for a correction or remedial
action in the first place:

1.
The checks issued by the Borrower and the joint and several guarantor(s) are
bounced due to insufficient fund deposit; or the checks prepared for making the
payment as provided by them are rejected after being presented for payment.

2.
The debts owed by the Borrower and the joint and several guarantor(s) to other
financial institutions are overdue and not paid.

3.
The occurrence of matters that are against the principles of good faith, such as
there exist false statements or omission of statements in the financial
statements or other data/documents delivered by the Borrower and the joint and
several guarantor(s) to the Bank.

 
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4.
The Borrower and the joint and several guarantor(s) fail to perform or violate
the written agreements reached with the Bank or the promises.

5.
The certificates, licenses or approvals required by relevant programs under the
I.O.U. are suspended, canceled or revoked for certain reasons.

6.
The chattels over which the mortgages are created in favor of the Bank have been
removed, sold, transferred or subject to other disposal measures.

7.
Failing to honor the promise made when entering into the contract to build the
factory according to the promised speed.

ARTICLE 2:

Unless the Bank agrees in writing, the Borrower and the collaterals provider
shall not sell (or transfer, lease out or lend) the collaterals, or create any
encumbrances over such collaterals or, if the collateral is an empty land),
build any illegal buildings on the unoccupied land where the mortgage is
created. In case of any violation of the above provisions, the Bank may set a
certain time period to request the Borrower or the collaterals provider to
provide another collateral of the same value approved by the Bank or request the
Borrower to settle the debts within the set time period and compensate all of
the damages suffered by the Bank as a result.

ARTICLE 3:

Before the Borrower repays all of the debts incurred hereon, if the Bank based
upon the Borrower’s request considers there is a need to extend the repayment
schedule or allow the debts to be repaid by installments, the Bank shall
immediately notify the joint and several guarantor(s) in writing. The joint and
several guarantor(s) agree to continue to bear the joint and several guarantee
liability when the written notice from the Bank has arrived or is deemed to have
been served upon such joint and several guarantor(s).

ARTICLE 4:

The Bank is authorized to apply with the tax offices to check the tax
information and properties of the Borrower and the joint and several
guarantor(s), if any events provided in Article hereof has occurred to them.

 
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ARTICLE 5:

The Bank and the joint and several guarantor(s) agree that the Bank may
outsource the work to collect the debts owed by them to the bank to a third
party.

ARTICLE 6:

If the Bank and/or the joint and several guarantor(s) fails to provide
sufficient collaterals for the credit extension for this Loan, the property the
information of which had been provided by the Bank and/or the joint and several
guarantor(s) to the Bank for documentary review before applying for the credit
extension shall not be used to create a trust.

ARTICLE 7:

The scope and amounts of the debts guaranteed by the collaterals which are
provided by the collaterals provider to the Bank to create mortgages, together
with the period of the mortgages, shall not be affected by the transfer of the
collaterals pursuant to a trust.

ARTICLE 8:

The joint and several guarantor(s) shall be responsible for repaying all the
debts owed by the Borrower hereunder jointly and severally with the Borrower.
Each joint and several guarantor(s) shall also be individually repaying all the
debts owed by the Borrower hereunder. The joint and several guarantor(s) further
agree to the following:

1.
The Bank is entitled to claim against the joint and several guarantor(s) for
repayment of the debts before seeking to be paid from the collaterals.

2.
After the joint and several guarantor(s) repaid the debts for the Borrower and
request the Bank to transfer the collaterals according to applicable laws, the
joint and several guarantor(s) shall not raise any objection to contend that the
rights to the collaterals are defective.

3.
The guarantor(s) shall be jointly and severally responsible for repaying all of
the debts owed by the Borrower hereunder. Such responsibility shall not be
affected by the fact that the Bank releases any or several joint and several
guarantor(s)’ liabilities or agree to replace any or several joint and several
guarantor(s) with others. Also, such responsibility shall not be discharged by
the fact that the instruments, notes or other relevant documents and
certificates issued by the Borrower hereunder have not been signed by the
guarantor(s).

 
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The Borrower, the joint and several guarantor(s) and the provider of the
collaterals hereby declare that the Article of the above SPECIAL TERMS AND
CONDITIONS have been reviewed article by article and stamp their chops as below:

Borrower:

Kidcastle Internet Technology Co. Ltd.
Responsible Person: Wang, Kuo An
Joint and several guarantor(s): Wang, Kuo An
Joint and several guarantor(s): Chiu, Yu En
Joint and several guarantor(s):
Provider of the collaterals: Wang, Kuo An

TO: FUHWA BANK:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals hereby represent that they have reviewed all of the terms and
conditions contained in this I.O.U. within a reasonable period of time, have
fully understood its contents and agree to execute this I.O.U. as below.

Borrower: Kidcastle Internet Technology Co. Ltd.
Responsible person: Wang, Kuo An
Address: 1st Fl., 148, Chien Kuo Rd., Hsin Dian City

Joint and several guarantor(s): Wang, Kuo An
Address: 2nd Fl., 299, Si Yuan Rd., 10 Lin, Chung Shan Borough, Hsin Dian City,
Taipei County

 
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Joint and several guarantor(s): Chiu, Yu En
Address: No. 71, Nan Chang Rd., Section 1, Long Fu Borough, Chung Shan District,
Taipei

Joint and several guarantor(s):
Address:

Joint and several guarantor(s):
Address:

Date: August 5, 2005
 
 
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FUHWA BANK

ACKNOWLEDGEMENT OF INDEBTEDNESS
FOR A
LOAN EXTENSION
(USED FOR FIXED-TERM LOAN)

Customer Number: 11589

This Acknowledgement of Indebtedness (“I.O.U.”) is executed by Kidcastle
Internet Technology Co. Ltd. (the “Borrower”) for a loan extended by Fuhwa Bank
(including its headquarter and all branches) (the “Bank”). The Borrower invites
the joint and several guarantor(s)(s) to provide a guarantee to jointly and
severally guarantee the Borrower’s performance of the obligations under the
I.O.U. and agrees to the following terms and conditions:

【GENERAL TERMS AND CONDITIONS】

ARTICLE 1:

The amount of the credit extended is: NT$31,000,000 (the “Loan”)

ARTICLE 2:

The term of the Loan is provided and the methods of repayment shall be made in
accordance with Section of this Article:

1.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the interest incurred on the Loan shall be paid by monthly. The total
principal shall be repaid at the maturity.

2.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the principal shall be divided into installments. The first
installment starts from _______. Thereafter, every month(s) is counted as one
installment. The principal shall be repaid according to the installments.
Interests shall be paid by monthly.

 
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3.
The term of the Loan is years (months), commencing from __________
to___________. After the borrowing, the Loan shall be divided into installments
and the principal and interests thereon be repaid on the ___th day of each
according to the annuity method.

4.
The term of the Loan is years, commencing from ______ to __________. After the
borrowing, the first ____ years are the grace period and the interests shall be
paid monthly. Commencing from the year, the Loan shall be divided into
installments and the principal and interests thereon be repaid on the 10th day
of each according to the annuity method.

5.
The term of the Loan is 7 years (0 months), commencing from August 10, 2005 to
August 10, 2012. After the borrowing, the Loan shall be divided into 84
installments. Each installment is one month. The principal and interests thereon
be repaid by monthly according to the annuity method for 180 payment terms. The
unpaid balance shall become matured and be paid at the expiry of the term of the
Loam. .

ARTICLE 3:

1.
The interests incurred from the borrowed funds shall be paid on a monthly basis.
The interests shall be calculated in accordance with Item (3), below:

(1)
The interest rate incurred for the Loan is calculated at the annual interest
rate of % (which is determined according to the base rate for a loan extension
at the time when the agreement of credit extension is executed plus a markup of
annual rate of %) The interests for the newly borrowed fund shall be determined
according to the base interest rate available at the time when the new fund is
borrowed plus a standard markup rate. Thereafter, when the Bank adjusts the base
interest rate, the interest rate shall be calculated according to the adjusted
base rate plus a markup of the annual floating interest rate. The markup of the
annual interest rate shall, after the execution of the agreement for credit
extension, be adjusted every three months in accordance with the Bank’s then
current “Guidelines Governing the Markup of Base Interest Rate for Credit
Extension.”

If the Bank’s base interest rate for the credit extension and/or the Guidelines
Governing the Markup of Base Interest Rate for Credit Extension as provided in
the preceding paragraph are adjusted and/or revised after the execution of the
agreement for credit extension, the Borrower agrees that the Bank may publicize
such adjusted and revised base interest rate for the credit extension and/or the
Guidelines Governing the Markup of Base Interest rate for Credit Extension in
its place of business and to be bound thereby.

 
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(2)
The interest rate for each tranche of the loan shall be determined by
negotiations between the Borrower and the Bank at the time of borrowing and be
calculated and paid at the agreed fixed interest rate. If the Borrower fails to
repay the principal and pay for the interests according to the agreed terms,
commencing from the day of the delay, the interest rate shall be calculated and
paid by adding 2.5% of annual rate to the base rate applied by the Bank.

(3)
The interest rate incurred for the Loan is calculated according to the
applicable base rate for a loan extension at the time of borrowing ( %) plus a
markup of annual rate of % (i.e. %). The interests for the newly borrowed fund
shall be determined according to the base interest rate available at the time
when the new fund is borrowed plus a markup rate. Thereafter, when the Bank
adjusts the base interest rate, the interest rate shall be calculated according
to the adjusted base rate plus a markup of the annual floating interest rate.

The above base interest rate applied by the Bank is the average fixed interest
rate (the exact figure shall be based upon the announcement of the Central Bank
of China) of the interest rates applied to “One-year Term Time Deposit” by 10
domestic banks + a fixed rate (risk discount of the Bank + administrative cost).

If the composition of the base interest rate provided in the preceding paragraph
is adjusted or revised after the execution of the agreement for credit
extension, the Borrower and the joint and several guarantor(s) agree that the
Bank may announce the adjusted and/or revised details in its place of business
and to be bound thereby.

 
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Explanation:

 
(i)
The reference banks for the average fixed interest rate of the interest rates
applied to “One-year Term Time Deposit” include: The Bank of Taiwan, Taiwan
Cooperative Bank, The Land Bank, The First Bank, Chang Hwa Bank, Hua Nan Bank,
Taiwan Business Bank, Cathay United Bank, The International Commercial Bank of
China and Taipei Bank.

 
(ii)
The periods of sampling, interest rate adjustment dates and periods of
application are as below:

Period of sampling
Interest rate adjustment date
Period of application
2/16 - 2/22
2/23
2/24 - 5/23
5/16 - 5/22
5/23
5/24 - 8/23
8/16 - 8/22
8/23
8/24 - 11/23
11/16 - 11/22
11/23
11/24 - 2/23

Note:
(A) The data shall be based upon the data announced by the Central Bank of China
at 11:30 AM of that current day. (B) Indexes shall only allow two numbers after
the decimal point. The third number after the decimal point, if it is bigger
than or equal to 5, shall be rounded up, and if it is smaller than or equal to
4, shall be rounded down.

 
(iii)
At present, the average fixed interest rate of the interest rates applied by 10
domestic banks to “One-year Term Time Deposit” is %.

 
(iv)
Under the following circumstances, the Borrower and the joint and several
guarantor(s) agree that the Bank has the absolute right and at its sole
discretion to change the reference banks providing the composition of the
indexes for the base interest rate and separately designate another domestic
bank to substitute:

(A)
The reference bank merges with other bank, is merged into other bank, is
extinguished, suspends the business, closes the business, is re-organized; or
any event under Article 62 of the Banking Law, which includes: being ordered to
suspend the business, being put under custody, being effected a mandatory
takeover, etc. occurs to the reference bank.

 
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(B)
The short-term credit rating of the reference bank is lower than Taiwan ratings.

(C)
The reference bank ceases selling one-year-term time deposit products.

(4) The interests are collected based on a flexible rate calculated according to
the following formula: The index of the time deposit of the Bank õ 7.29û (i.e.
the annual interest rate of 5û). 
 
ARTICLE 4:

If the Borrower fails to repay the principal and the interests according to the
I.O.U., the Borrower agrees to pay for the delay interest rate calculated
according to the interest rate applicable to this Loan for the delayed principal
amount. The Borrower further agrees to pay for penalties calculated according to
the following formula for the delayed payment for the principal and the
interests: The penalty for the delayed payment for the principal shall be
calculated from the maturity date and that for the delayed payment of the
interests shall be calculated from the interests payment day at the, at the rate
of 10 % of the interest rate for this Loan for the delay period within six
months and at the rate of 20% of the interest rate for this Loan for the delay
period above six months.

ARTICLE 5:

The purpose of use of this Loan shall be limited to .

ARTICLE 6:

In order to perform the obligations owed to the Bank, the Borrower and the joint
and several guarantor(s) agree to authorize the Bank from time to time and at
the Bank’s sole discretion to deduct from the demand accounts opened by the
Borrower and/or the joint and several guarantor(s) in their names (account
number: ) any amount at the time of maturity or the time of advancement to pay
for the principal, interests, default interests, penalty advances and other
expenses (including the insurance premium for the collaterals), without the
necessary to present the passbook and the withdrawal slip.

 
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ARTICLE 7:

The term “obligation” or “all obligations” referred to hereunder shall mean the
loan, instruments, advances, guarantee, overdraft and other obligations,
including but not limited to interests, default interests, penalty, compensation
of damages, the insurance premium, expenses for executing mortgages, expenses to
obtain an enforcement title and other related expenses.

ARTICLE 8:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals agree that the Joint Credit Information Center and its member
financial institutions, Clearing Houses, Small and Medium Business Credit
Guarantee Fund, National Credit Card Center, Financial Information Service Co.,
Ltd., the assignees/transferees of the Bank’s obligations/rights hereunder and
the participants (or the entity which plans to be assigned/transferred) in the
Loan, the person auditing the appraisal of the value of the debts or any agent
appointed by the Bank to handle the outsourced work, or other domestic or
overseas institutions handling financial affairs (including SWIFT) and other
relevant institutions corresponding with the Bank, may collect, proceed with
computer processing on, conduct international transmission of, use and provide
to each other the following information and data of the Borrower, joint and
several guarantor(s) and provider of the collaterals:

Credit reports, credit extension data (including overdue, collection and bad
debts records), deposits data, financial data, collaterals and other movables or
real property information, credit information regarding the instruments, credit
cards (including IC Cards and magnetic cards)credit card information, credit
information in the credit card merchants and other personal information relating
to the credit extension or transactions.

The computer processing of such data and information and the period of the use
in relevant institutions shall be the approved period of preservation for such
files and data which relevant institutions applied with the competent
authorities for registration.

 
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The Borrower agrees that the Bank may from time to time monitor the Borrower’s
use of the Loan extended to the Borrower and the business and financial status
of the Borrower, examine/custody the collaterals, examine relevant accounts and
books, statements (including the consolidated financial statements of the
affiliates), check and review certificates, slips and documents. When the Bank
deems necessary, the Bank may request the Borrower to fill out the requested
information and deliver the requested data and information to the bank on a
regular basis, or provide to the Bank the financial statements audited by the
CPA approved by the Bank and request such CPA to provide relevant drafts of
his/her work. If the Bank considers that the financial statements or other
documents delivered by the Borrower are false, as soon as receiving the notice
from the Bank, such will be deemed as a default by the Borrower; provided,
however, the Bank does not have the obligation to monitor, audit, examine,
custody and check such statements and documents. If the Bank considers that the
Borrower’s financial structure should be improved, the Bank may demand the
Borrower to take actions to improve its financial structure. The Borrower shall
comply with such demand to improve.

ARTICLE 9:

Any individual/entity holding the receipt or custody certificate issued by the
Bank or the Borrower’s chop or the receipt documents signed by the Borrower goes
to the Bank to request for returning or replacing the collaterals and the
documents related thereto shall be deemed as the agent of the Borrower. The Bank
may approve to return or replace.

ARTICLE 10:

If the obligations hereunder are covered by the collaterals obtained from the
extension of this Loan or from other credit extensions, except for complying
with the terms and conditions set forth in the respective collaterals
agreements, the Borrower shall comply with the following provisions:

 
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1.
For the collaterals which are insurable, the Borrower and the provider of such
collaterals shall in each year procure appropriate fire insurance (including
earthquake insurance) or other insurance coverage required by the Bank for the
collaterals form the insurance company for the period starting from the
commencement of the term of the Loan and ending on the day that the Loan is
repaid. In such insurances, the Borrower shall include the Bank as the mortgagee
to apply with the insurance company to add special terms and conditions for the
mortgage. The insured amount and the terms and conditions of the insurance
policies shall be approved by the Bank. The Borrower and the collaterals
provider shall be jointly and severally responsible for paying the insurance
premium and other related costs. The original copy of the insurance policy and
the photocopy of the receipt for the insurance premium shall be kept by the
Bank. If the Borrower and the collaterals provider forget to procure the
insurance or renew the insurance, the Bank may use this I.O.U. as an
authorization letter to procure/renew the insurance on their behalf. If the Bank
has advanced the insurance premium, the Borrower and the collaterals provider
shall repay the advanced fund immediately. If the Borrower and the collaterals
provider fail to repay the advanced fund immediately, the Bank may add such
advanced fund into the mount owed by the Borrower and collect interests incurred
thereon according to the interest rate provided hereunder. However, the Bank
does not have the obligation to procure or renew he insurance policy or pay for
the insurance premium. If unfortunately the insured collaterals are damages,
lost or destroyed and the insurance company refuses or delays to pay for the
compensation for the damages which the insurance company is required to pay for
whatever reasons, the Bank may set a certain period of time to request the
Borrower to provide a security approved by the Bank having the value equal to
the reduced value of such collaterals within such time period. If the Borrower
fails to provide such a security within the set time period, the Bank is
entitled to request the Borrower to repay the debts immediately.

2.
If the payment made by the Borrower or the payment made though automatic
transfer from the Borrower’s account according to the agreement is insufficient
to repay all of the overdue loan owed by the Borrower, the collaterals shall be
used to set off against the various expenses (including the insurance premium
for the collaterals advanced by the Bank), penalty, interests, delay interests
and the principal in the same order.

3.
The Bank’s headquarter and all of its branches may share and exercise the rights
over the collaterals provided by the Borrower and/or the collaterals provider
hereunder, irrespective of whether their rights are created earlier or later, to
obtain guarantee from such collaterals to secure the present debts (including
those already occurred but not being repaid and not limited to the total amount
of credit extension agreed hereunder) and future debts owed by the Borrower in
the form of instruments, loans, advances, insurances and all other debts,
together with the incurred interests, delay interests, penalties, damages and
all of the expenses required for performing the obligations of the above debts.

 
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ARTICLE 11:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), the Bank may from time to time reduce the extended
credit amount or shorten the period of the credit extension without the
necessity to send any prior notice or demand for a correction or remedial action
in the first place:

1.
Failing to repay the principal for any indebtedness according to the agreement.

2.
The Borrower and/or the joint and several guarantor(s) file for reconciliation
or is declared bankruptcy according to the Bankruptcy Act, apply for
reorganization according to eh Company Law, are declared by the clearing houses
to be a company/individual with which the transactions are rejected, suspend the
business operation or proceed a debt arrangement..

3.
The Borrower and/or the joint and several guarantor(s) have the obligation to
provide guarantees according to the original agreement, but fail to provide such
guarantees.

4.
The Borrower and/or the joint and several guarantor(s) die and their heirs
declare a limited inheritance or waive their rights to inherit.

5.
The Borrower and/or the joint and several guarantor(s) are declared a
confiscation of their major properties in criminal cases.

ARTICLE 12:

In case that any of the following events occurred to the Borrower or the joint
and several guarantor(s), after the Bank has given a notice or demand within a
reasonable period, the Bank may reduce the extended credit amount or shorten the
period of the credit extension or treat all of the loan as matured:

1.
The interests incurred on any debt are not paid.

2.
The collateral is foreclosed or the collateral is lost, or the value of which is
reduced or is insufficient to secure the obligations.

 
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3.
The actual use of the fund obtained from the loan extended by the Bank does not
conform to the purpose of use selected by the Bank.

4.
The Borrower and/or the joint and several guarantor(s) are subject to compulsory
execution, provisional attachment, provisional measures or other protecting
measures, which has made the Bank to face a threat that the debt may not be
repaid.

ARTICLE 13:

If the Bank transfers/assigns all or part of the rights claimable by the Bank
according to the I.O.U. (including the rights to claim against the Borrower and
the joint and several guarantor(s) to pay for the interests and the repay the
loan), together with the mortgages and insurance benefits the Bank obtained
according to the agreement, to a third party, it is the Bank or the
transferee/assignee’s obligation to notify the Borrower. After the Borrower, the
joint and several guarantor(s) and collaterals provider agreed to such
transfer/assignment and the Bank or the transferee/assignee has notified the
Borrower, if any changes of the mortgages registration or the beneficiary under
the insurance contract are required due to such transfer/assignment, they shall
cooperate to change the mortgages registration and/or the beneficiary without
any objection.

If such transfer/assignment is for securitizing the Bank’s financial assets or
the transferee/assignee is an asset management company, the notice stated in the
preceding paragraph can be replaced by public announcement.

ARTICLE 14:

The Bank may exercise the rights of set-off against the various funds deposited
by the Borrower and the joint and several guarantor(s) in the Bank (including
the deposits in the checking accounts which have been suspended according to the
agreement) and all the rights claimable against the Bank, whether or not such
funds and/or rights have matured.

The expression of intention to exercise the right of set-off as provided in the
preceding paragraph shall become effective as soon as the Bank records such
set-off and deduction on its books and accounts. In the meantime, the deposit
slips, the passbook and other certificates shall, within the set-off amount,
loose their effect.

 
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ARTICLE 15:

If the debt certificates evidencing the various debts owed by the Borrower and
the joint and several guarantor(s) are lost, destroyed or damaged, unless the
amounts stated on the Bank’s accounts and books, vouchers, computer generated
certificates/slips, debt certificates and micro-copies of the correspondences
are proved by the Borrower and the joint and several guarantor(s) to be
erroneous and the Bank shall immediately correct such errors, the Borrower and
the joint and several guarantor(s) shall admit the full amounts stated thereon
and, when such amounts mature, immediately pay for various expenses incurred for
such amounts, penalties and the principal and interests, or at the Bank’s
request issue another debt certificates before the maturity to the Bank for the
Bank’s safe-keeping.

ARTICLE 16:

In the event that the Borrower changes its name, organization, contents of its
articles of association, seal/chop, representative, scope of authority delegated
to the representative, or the occurrence of any event which may affect the
rights and interests of the Bank, the Borrower shall immediately notify the Bank
in writing of such events and complete the procedures of change or cancel the
seal/chop specimen kept in the Bank.

The Borrower and the joint and several guarantor(s) shall be responsible for the
transactions conducted before sending the notice and completing the procedures
as provided in the preceding paragraph and compensate the Bank for any damages
it has suffered which were resulted thereof.

ARTICLE 17:

In the event that the Borrower and the joint and several guarantor(s) change
their addresses, Borrower and the joint and several guarantor(s) shall
immediately notify the Bank. If Borrower and the joint and several guarantor(s)
fail to send the above notice and the Bank sends relevant documents to the
addresses provided hereunder or to the last addresses notified by the Borrower
and the joint and several guarantor(s), such documents shall be deemed to have
been served upon the Borrower and the joint and several guarantor(s) at the
expiry of the traveling period normally required by the post office.

 
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ARTICLE 18:

The requirements, effects and the formalities of the legal action for the
creation of the debts incurred to the Borrower and the joint and several
guarantor(s) based upon this I.O.U. shall be governed by the laws of the
Republic of China.

ARTICLE 19:

The place for performing the obligation hereunder shall be the business place of
the Bank. Any disputes arising out of or in connection with this I.O.U. shall be
subject to the Taipei District Of Taiwan for the first instance; provided,
however, if the law mandates a court to have exclusive jurisdiction over such
dispute, such mandated exclusive jurisdiction shall prevail.

ARTICLE 20:
Any matters not provided for in this I.O.U. shall be negotiated by the Borrower
and the joint and several guarantor(s) with the Bank separately.

【SPECIAL TERMS AND CONDITIONS】

ARTICLE 1:

In the event that any amount deposited by the Borrower and the joint and several
guarantor(s) in the Bank is attached or frozen by other person according to the
law, the Bank may from time to time reduce the extended credit amount or shorten
the period of the credit extension or deem all of the debts as matured, without
the necessity to send any prior notice or demand for a correction or remedial
action in the first place:

1.
The checks issued by the Borrower and the joint and several guarantor(s) are
bounced due to insufficient fund deposit; or the checks prepared for making the
payment as provided by them are rejected after being presented for payment.

2.
The debts owed by the Borrower and the joint and several guarantor(s) to other
financial institutions are overdue and not paid.

 
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3.
The occurrence of matters that are against the principles of good faith, such as
there exist false statements or omission of statements in the financial
statements or other data/documents delivered by the Borrower and the joint and
several guarantor(s) to the Bank.

4.
The Borrower and the joint and several guarantor(s) fail to perform or violate
the written agreements reached with the Bank or the promises.

5.
The certificates, licenses or approvals required by relevant programs under the
I.O.U. are suspended, canceled or revoked for certain reasons.

6.
The chattels over which the mortgages are created in favor of the Bank have been
removed, sold, transferred or subject to other disposal measures.

7.
Failing to honor the promise made when entering into the contract to build the
factory according to the promised speed.

ARTICLE 2:

Unless the Bank agrees in writing, the Borrower and the collaterals provider
shall not sell (or transfer, lease out or lend) the collaterals, or create any
encumbrances over such collaterals or, if the collateral is an empty land),
build any illegal buildings on the unoccupied land where the mortgage is
created. In case of any violation of the above provisions, the Bank may set a
certain time period to request the Borrower or the collaterals provider to
provide another collateral of the same value approved by the Bank or request the
Borrower to settle the debts within the set time period and compensate all of
the damages suffered by the Bank as a result.

ARTICLE 3:

Before the Borrower repays all of the debts incurred hereon, if the Bank based
upon the Borrower’s request considers there is a need to extend the repayment
schedule or allow the debts to be repaid by installments, the Bank shall
immediately notify the joint and several guarantor(s) in writing. The joint and
several guarantor(s) agree to continue to bear the joint and several guarantee
liability when the written notice from the Bank has arrived or is deemed to have
been served upon such joint and several guarantor(s).

 
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ARTICLE 4:

The Bank is authorized to apply with the tax offices to check the tax
information and properties of the Borrower and the joint and several
guarantor(s), if any events provided in Article hereof has occurred to them.

ARTICLE 5:

The Bank and the joint and several guarantor(s) agree that the Bank may
outsource the work to collect the debts owed by them to the bank to a third
party.

ARTICLE 6:

If the Bank and/or the joint and several guarantor(s) fails to provide
sufficient collaterals for the credit extension for this Loan, the property the
information of which had been provided by the Bank and/or the joint and several
guarantor(s) to the Bank for documentary review before applying for the credit
extension shall not be used to create a trust.

ARTICLE 7:

The scope and amounts of the debts guaranteed by the collaterals which are
provided by the collaterals provider to the Bank to create mortgages, together
with the period of the mortgages, shall not be affected by the transfer of the
collaterals pursuant to a trust.

ARTICLE 8:

The joint and several guarantor(s) shall be responsible for repaying all the
debts owed by the Borrower hereunder jointly and severally with the Borrower.
Each joint and several guarantor(s) shall also be individually repaying all the
debts owed by the Borrower hereunder. The joint and several guarantor(s) further
agree to the following:

1.
The Bank is entitled to claim against the joint and several guarantor(s) for
repayment of the debts before seeking to be paid from the collaterals.

 
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2.
After the joint and several guarantor(s) repaid the debts for the Borrower and
request the Bank to transfer the collaterals according to applicable laws, the
joint and several guarantor(s) shall not raise any objection to contend that the
rights to the collaterals are defective.

3.
The guarantor(s) shall be jointly and severally responsible for repaying all of
the debts owed by the Borrower hereunder. Such responsibility shall not be
affected by the fact that the Bank releases any or several joint and several
guarantor(s)’ liabilities or agree to replace any or several joint and several
guarantor(s) with others. Also, such responsibility shall not be discharged by
the fact that the instruments, notes or other relevant documents and
certificates issued by the Borrower hereunder have not been signed by the
guarantor(s).

The Borrower, the joint and several guarantor(s)s and the provider of the
collaterals hereby declare that the Article of the above SPECIAL TERMS AND
CONDITIONS have been reviewed article by article and stamp their chops as below:

Borrower:

Kidcastle Internet Technology Co. Ltd.
Responsible Person: Wang, Kuo An
Joint and several guarantor(s): Wang, Kuo An
Joint and several guarantor(s): Chiu, Yu En
Joint and several guarantor(s):
Provider of the collaterals: Wang, Kuo An

TO: FUHWA BANK:

The Borrower, the joint and several guarantor(s) and the provider of the
collaterals hereby represent that they have reviewed all of the terms and
conditions contained in this I.O.U. within a reasonable period of time, have
fully understood its contents and agree to execute this I.O.U. as below.

Borrower: Kidcastle Internet Technology Co. Ltd.
Responsible person: Wang, Kuo An
Address: 1st Fl., 148, Chien Kuo Rd., Hsin Dian City

 
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Joint and several guarantor(s): Wang, Kuo An
Address: 2nd Fl., 299, Si Yuan Rd., 10 Lin, Chung Shan Borough, Hsin Dian City,
Taipei County

Joint and several guarantor(s): Chiu, Yu En
Address: No. 71, Nan Chang Rd., Section 1, Long Fu Borough, Chung Shan District,
Taipei

Joint and several guarantor(s):
Address:

Joint and several guarantor(s):
Address:

Date: August 5, 2005
 
 
 
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