Guaranty Contract of Maximum Amount
No. 81905200700000125

Creditor: Shenzhen Eastern Branch, Agricultural Bank of China
Guarantor: BAK International Limited, Li Xiangqian
Whereas: Shenzhen BAK Battery Co., Ltd. (hereinafter referred to as “Obligor”)
and the Creditor have entered into a serial of Loan Agreements (hereinafter
referred to as “Loan Agreements”) within the period and under the maximum amount
as stipulated in Clause I of this Contract. The Guarantor undertakes to provide
guaranty for the indebtedness of the Obligor under the Loan Agreements. In
accordance with relevant PRC laws and regulations and through friendly
negotiation, the Parties agree to enter into this Contract:

I. Indebtedness to be secured and maximum amount

1.
The Guarantor undertakes to provide guaranty for the indebtedness owed by the
Obligor to the Creditor derived from the agreed operations from June 8, 2007 to
May 23, 2008. The balance of the aforesaid indebtedness shall not exceed RMB
Eight Hundred Million yuan and indebtedness in foreign currency shall be
calculated according to the selling price on the date of the operation. The
mature date of the aforesaid indebtedness shall not exceed May 23, 2009. The
abovementioned operations include: Loan in RMB/Foreign Currency; Issuance of L/C
without or with reduced of deposit; exporter’s packing loan; discount of
bank/commercial draft; inward documentary bill; outward documentary bill; bank
guarantee; acceptance of bank draft.

2.
The Obligor is entitled to apply for revolving utilization of the abovementioned
bank credit facilities within the term and under the maximum amount as
stipulated in this Contract. The beginning date, mature date, interest rate and
amount of each indebtedness shall be determined by the loan certificate or
relevant credit certificate under the Loan Agreements.

 
 
 

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3.
The Parties do not need to enter into individual guaranty arrangement for each
of the bank loan or bank facility granted by the Creditor within the term and
under the maximum amount as stipulated in this Contract.

4.
The operations may be carried out in any currency and the Guarantor’s guaranty
is for the indebtedness in the original currency.

II. Scope of Guaranty
The guaranty under this Contract shall cover all of the loan principal,
interest, penalty interest, breach of contract compensation and all the expenses
such as litigation cost and lawyer’s fee etc. which is incurred to the Creditor
in realizing its creditor’s right.
The Guarantor shall also bear joint and several liability for the indebtedness
of the Obligor which exceeds the agreed maximum amount due to fluctuation of
exchange rate of foreign currency.

III. Method of Guaranty
The guaranty under this Contract is guaranty with joint and several liability.
And in case that there are more than one guarantor under this Contract, each
guarantor shall all bear joint and several liability for the indebtedness of the
Obligor.

IV. Guaranty Period

1.
The guaranty period under this Contract shall be two years from the expiry date
for the indebtedness of the Obligor under the Loan Agreements.

 

2.
For acceptance of bank draft, issuance of L/C without or with reduced deposit
and bank guarantee, the guaranty period shall be two years from the date that
the Creditor bears the obligations of the Obligor.

 
 
 

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3.
For discount of commercial draft, the guaranty period shall be two years from
the expiry date of the commercial draft.

4.
In case that the Obligor and Creditor reach agreement to extend the term of the
indebtedness of the Obligor, the Guarantor shall continue to bear the obligation
of guaranty and the guaranty period shall two years from the expiry of the
extended term of the indebtedness.

5.
Upon occurrence of certain event as stipulated by law or the Loan Agreement, the
Creditor may demand the indebtedness of the Obligor become mature before the
expiry of the original term. And under such circumstance the guaranty period
shall be 2 years from the mature date of the indebtedness as demanded by the
Creditor in accordance with law or the Loan Agreement.

V. The Guarantor undertakes that:

1.
he/she shall provide truthful, comprehensive and effective financial reports and
other relevant materials and information to the Creditor;

2.
he/she shall perform the obligation of guaranty voluntarily in case of default
by the Obligor;

3.
in case that the Guarantor fails to perform his/her obligation of guaranty in
accordance with this Contract, the Creditor is entitled to transfer directly the
relevant amount of deposit from any account of the Guarantor to the Creditor’s
account.

4.
he/she shall notify the Creditor in writing within 5 days upon the occurrence of
the following events:

 
(1)
The shareholder, senior management, articles of association or corporate
governance structure of the Guarantor has been altered;

 
 
 

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(2)
The Guarantor ceases its business operation or its business license has been
withdrawn or cancelled;

 
(3)
The Guarantor’s financial status deteriorates or its business operation
encounters serious difficulty or it is involved in major litigation or
arbitration;

 
(4)
The Guarantor changes its name, address, legal representative, contact
information etc.

 
(5)
Any other events of the Guarantor that may make the Creditor unable to execute
its creditor’s right.

5.
The Guarantor shall give 15-day prior written notification to the Creditor and
obtain the Creditor’s consent before it takes any of the following actions:

 
(1)
The Guarantor changes its capital structure or management system, which includes
(without limitation) contractual management, lease, share structure
transformation, joint venture, merger, acquisition, division, application for
cease of business operation, application for dissolution, application for
bankruptcy etc.

 
(2)
The Guarantor provide guaranty for any other third party or establish mortgage
or pledge on its major assets for the benefit of any other third party which may
affect its performance of obligation of guaranty under this Contract.

6.
In case that the Obligor provides collateral to secure its indebtedness, the
Guarantor undertakes that he/she shall perform the obligation of guaranty prior
to the execution of the collateral.

7.
In case that the Obligor and Guarantor breach their obligations under the Loan
Agreement or this Contract, the Creditor is entitled to declare that the
indebtedness of the Obligor all become mature and demand the Guarantor to
perform his/her obligation of guaranty of joint and several liability in
accordance with this Contract.

 
 
 

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VI. Breach of Contract
The Obligor and Guarantor shall perform their obligations in accordance with
this Contract after it becomes effective. In case of breach of contract by any
party, the breaching party shall bear the relevant liabilities and compensate
the loss incurred to the other party by its breach of contract.

VII. Dispute Settlement
In case of any dispute deriving from the performance of this Contract, such
dispute shall be settled by consultation between the parties or be submitted to
the People’s Court located in the address of the Creditor.
During the course of litigation, the parties shall continue to perform this
Contract except for the provisions at issue.

VIII. Miscellaneous
1.
The Guarantor shall find out on his/her own initiative the business status of
the Obligor and occurrence and performance of the operations under this
Contract. The Loan Agreement, loan certificate or relevant credit certificate
for the operations under this Contract will not sent to the Guarantor
separately.

2.
This Contract is to secure the indebtedness under the Comprehensive Credit
Facility Agreement of Maximum Amount (reference no. 81001200713170001) entered
into by the Obligor and Creditor.

IX. Effectiveness
This Contract shall become effective once it is signed or stamped by both
parties.

X. This Contract has five originals. The Guarantor shall retain one original and
the Creditor shall retain three originals. Each original shall have the same
legal effect.

 
 

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XI. Attention
The Creditor has drawn the attention of the Guarantor to understand each clause
of this Contract clearly and comprehensively and has explained the relevant
clauses upon the request of the Guarantor. Both parties’ construction of this
Contract is the same.
 
Creditor (company chop): ______________________
Authorized Representative (signature): ___________

Guarantor (signature): ___________________________

Date of Execution: June 8, 2007
Venue of Execution: Shatoujiao, Shenzhen