**MEMORANDUM        OF UNDERSTANDING AND SHAREHOLDER AGREEMENT DATED 18**
**TH**

**        MAY 2006**

**PARTIES        TO THE AGREEMENT**

**Purpose        of the Agreement**

| ·   | NME                  will hold 51% of the issued share                  capital. |
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| ·   | Sistech                  will hold 49% of the issued share                  capital. |
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**Objective        of the New Business **

| a)   | to                  license VMD technology to explicators and electronic manufacturers                  in                  China |
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| b)   | to                  promote, market and sell VMD products to overseas buyers in Europe                  etc. |
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**Electronics**

| a)   | Licensing                  of VMD technology to OEMs, ODMs in China and South East Asia. This                  is a                  very big job as Licensing is the main feature of our activity and                  these                  guys have a lot of experience in this                  field. |
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| b)   | Sales                  & Marketing to European customers. Support US Sales                  operations |
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| c)   | Supervise                  all logistics and customer care of all shipments                  abroad |
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| d)   | Collection                  of licensing fees. |
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| e)   | Organise,                  coordinate and participate in relevant trade fairs in China and                  South East                  Asia |
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| f)   | Aggressively                  promote VMD in the press etc. |
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| g)   | Coordinate                  our activities in Taiwan with Drive manufacturers etc. |
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| h)   | Take                  care of Taiwan as well in a similar capacity. |
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**Optics**

| a)   | Researching                  and appointing licensing for optic                  replication |
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| b)   | Sales                  of VMD discs and coordinate with content                  providers |
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| c)   | Collection                  of licensing fees |
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| d)   | Aggressively                  promote VMD optic in the press etc. |
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***It        is agreed henceforth***

**1.        The Directors shall not:**

| ·   | Change                  the original shareholding structure of the company i.e. NME holds                  51% and                  Sistech holds 49% |
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| ·   | Open                  any new bank accounts other than to be opened by the new company                  at the                  time of establishment. |
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| ·   | Enter                  any new loan agreements, debentures or provide any guarantees or                  indemnities |
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| ·   | Deviate                  materially from the business plan or enter any new area of                  business |
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| ·   | Transfer,                  lease, assign, grant any license over any company property other                  than the                  sale of current assets in the normal course of                  trading |
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| ·   | Establish                  any subsidiary |
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| ·   | Authorise                  any increase in the authorised share capital of the                  company |
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| ·   | Agree                  the sale or takeover of the                  business |
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| ·   | Authorise                  any share option schemes or revise director                  emoluments |
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**2.        The directors shall:**

| ·   | Hold                  a monthly board meeting, with a maximum of 30 days between meetings,                  and a                  minimum of 10 board meetings per calendar                  year. |
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| ·   | At                  each board meeting, the time, date and place for the next meeting                  shall be                  agreed and each director and investor representative shall be notified                  at                  least 4 days prior to it. |
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| ·   | Circulate                  an agenda a week in advance of the meeting, including minutes from                  the                  last board meeting for approval. The agenda will include a review                  of                  trading activities and financial status, as well as any other material                  issues that are proposed for inclusion by directors and/or shareholders                  representing 51% of issued shares. Proposed agenda items should                  be                  proposed to the chairman at least 4 days prior to the                  meeting. |
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| ·   | Present                  a brief monthly management report, including a set of management                  accounts,                  covering progress in relation to plan, prospects for the business,                  and                  highlighting any key or material issues faced by the company. |
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**3.        Banking Arrangements/Transfer of Funds**

| ·   | The                  Company shall have **2**authorised                  signatories to all bank accounts, who must be directors, and shall                  be                  registered by the directors with the company’s                  banks. |
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| ·   | In                  the normal running of the business one ‘cheque book’/register of payments                  shall be used and kept by the Financial Director who will usually                  make                  routine payments. |
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| ·   | Any                  cheques or transfers in excess of $ 2,000 shall be required to                  be signed /                  authorised by two signatories, and any over $ 7,500 must additionally                  be                  approved by the board. |
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**4.        Share Issues and Sale of Shares by the company or        shareholders**

| ·   | Transfer                  of shares from an existing shareholder. Any transfer, other than                  within                  family members, or as a result of bereavement, or as a gift, must                  be                  approved by the board under the 51 % rule. Such consent shall not                  be                  unreasonably withheld. |
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| ·   | Any                  sale of shares must be approved, such consent will not be reasonably                  withheld, and existing shareholders shall have first refusal to                  purchase                  the shares under the same terms. Any issue/sale of shares by the                  company                  shall be offered to the existing shareholders under the same terms                  and                  they will have a pre-emption right to purchase such                  shares. |
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**5.        In the event of shareholder incapacity**
**or        worse**

| ·   | The                  shareholder shall nominate a representative, or nominate a member                  of the                  board, or the chairman, to vote on matters relating to the company                  on                  his/her behalf in the vent of their incapacity until he/she issues                  written                  instructions to the contrary or legal clarity is established between                  his                  estate and its benefactors. In the event of no such representative                  being                  available, then a spouse, or next of kin, shall be asked to act.                  They                  shall have the right to attend board meetings. This representative                  shall                  not be held liable by any party to this agreement, or any party                  acting in                  behalf of the shareholders benefactors, for any consequences of                  their                  decision-making. |
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| ·   | The                  board and all shareholders will accept the representative’s authority to                  vote on any matters of company                  policy. |
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| ·   | The                  normal management of the company shall continue to under the remaining                  board based on normal board decision-making process. The directors                  shall                  be reasonable and consider the interests of the absent shareholder                  and act                  in good faith. They shall not be liable if decisions made were                  not to the                  maximum benefit of the absent                  shareholder. |
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**6.        Removal of Directors**

| ·   | 2                  other directors or major shareholders propose his/her removal in                  writing,                  this shall immediately be put to a vote and confirmed by a simple                  majority                  of over 50%. |
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| ·   | OR                  by the unanimous decision of the other board members providing                  there are                  at least four members on the board. |
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| ·   | Under                  such circumstances the severance rights in the director’s service contract                  shall apply, as will their rights as shareholders under this                  agreement. |
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**7.        Right to appoint a Non Executive Director or Investor        Representative**

| ·   | Any                  investor, holding **50%**                  or                  more of the company’s issued shareholder capital shall have the right to                  appoint a non-executive director to the board, or to have a non-voting                  representative present at board meetings. The Board of Directors,                  acting                  unanimously, shall have the right to veto the appointment of any                  individual. |
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**8.        Dividend Policy**

| ·   | It                  is not expected that the company will make a dividend for the next                  one                  year. After that any shareholder, or shareholders acting as one                  through                  written authority, representing at least 5% of the ordinary voting                  equity                  of the company shall have the right to insist that at least 10%                  of profits                  available for distribution (within the definitions of the Companies                  Act                  1985) in the accounting period, are distributed by way of cash                  dividends                  within 6 months of the end of that accounting period - providing                  it is                  lawful to do so. |
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**9.        Shareholder and director confidentially obligations.**

| ·   | To                  keep all matters relating to the company confidential except where                  disclosure is required by law, or as part of the process of seeking                  personal advice on the investment from professional advisers, whom                  the                  shareholder warrants will ensure                  confidentiality. |
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| ·   | Each                  parties obligations |
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**Sistech        Obligations**

| a)   | optic                  replicators in China to replicate VMD's in the                  future |
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| b)   | electronic                  2 and 3 tier manufacturers to adopt VMD in DVD                  players |
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| a)   | Provide                  an office address with a dedicated Assistant to handle all J.V                  matters |
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| b)   | Provide                  within Sistech office a showroom of our                  products |
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| c)   | Aggressively                  promote and market our products - optics and electronics to the                  China                  industry |
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| d)   | Aggressively                  and market our product line to overseas customers who are current                  Sistech                  customers |
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| e)   | Aggressively                  act as a global sourcing agent for NME. |
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**NME        Obligations **

| a)   | invest                  $ 100k in J.V and the funds to be drawn down at $ 15k per month                  to run all                  expenses including your fees in the J.V ( this will not include                  any                  overseas travel or participation in any exhibitions etc,                  marketing/advertisement etc which will be approved on a case by                  case basis                  by NME.) |
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| b)   | to                  support VMD sales and provide l/c facilities for confirmed l/c                  orders from                  abroad if necessary |
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| c)   | provide                  performance related bonuses to the Directors and management of                  the J.V in                  cash and NME shares as agreed by the board. |
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| d)   | to                  permit the Directors and management of the new company to participate                  in                  any share incentive schemes of NME which will form part of the                  Director                  service contracts. |
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| Director                  / Shareholder Name: | Signature: | Date:  |
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| Company                  Secretary: | Signature: | Date:  |
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