EXHIBIT 10.5
 
Security Agreement
[Unofficial Translation]
 
    Code: No. GJC201110

Party A: GOLDRIVER INDUSTRIAL HOLDING LIMITED

Party B: Beijing Guojincheng Asset Management Co., Ltd.

Address:

To ensure the implement of the agreement (No. GJC201110) (“main contract”)
between NEW ENERGY SYSTEMS GROUP (“Debtor”) and Party B, Party A is willing to
provide collateral to the debt formed in accordance with the main contract
between Party B and the Debtor. Based on the relevant laws, regulations and
rules, both Parties negotiated and reached the following agreement.

1.  
Collateral

Party A’s security is based on the Article 13 “Collateral List” of this
agreement.
Party A warrants that it has ownership and disposition rights of the collateral.
Party A warrants that there is no ownership dispute on the collateral, nor is
the collateral closed down or detained.

2.  
The scope of security

Debt principal of RMB 30 million and interest (including compound interest and
penalty interest), penalty, damages, relevant expenses paid by Party B and all
expenses which Party B spent to achieve debt and security (including but not
limited to legal fees, arbitration fees, property preservation fees, travel
expenses, implementation fees, assessment fees, auction fees and etc).
When the debtor fails to fulfill its obligations, Party B shall be entitled to
request Party A to bear the responsibility within the scope of its guarantee,
whether or not it claims any other security under the main contract (including
but not limited to guarantee, mortgage, pledge, standby letter of credit and
others).
 
 
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3.  
The duration of the security

The duration of the security shall be terminated two years after the statute of
limitations during which Party B can claims the outstanding debt.
 
4. 
Change of the main contract

Party A confirms that if Party B and the debtor agree to change the main
contract, Party A shall be deemed to consent to such change in advance and Party
A does not thereby waive its guarantee obligations, except the changes that:
a.  
Extend the debt performance period; or

b.  
Increase the principle amount of debt.

5.  
The independence of the effect of contract

The validity of this agreement is independent from the main contract. The main
contact’s effect doesn’t affect this agreement. If the main contract is
recognized as invalid, Party A bears the responsibility to the loss when the
debtor returns the collateral.

6.  
Custody of collateral

During the duration of the security, Party A shall have the obligation to take
care of the collateral, to keep the collateral in good condition and ready to
accept Party B’s inspection. If any damage, loss or other situation caused the
collateral’s value to decrease significantly, Party A shall inform Party B
immediately and provide other collaterals of the same value within 7 business
days.
a.  
With Party B’s consent to fix the collateral to recover its value;

b.  
To deposit with third party designated by Party B;

c.  
After Party A provides the new collateral in accordance with Party B’s request,
the insurance compensation can be freely disposed of.

7.  
Third party’s damage compensation

During the duration of the security, if the decrease of collateral’s value is
caused by a third party, the compensation shall be deposited into Party B’s
designated account. Party A agrees that Party B has the following options and
should assist with the relevant process:
a.  
Discharge or early repayment  of the debt principal, interest and related cost
under the main contract;

b.  
Transfer to deposit and use the deposit certificate as collateral;

c.  
With Party B’s consent, repair the collateral to recover its value;

d.  
Deposit to Party B’s designated third party;

e.  
After Party A provides the new collateral in accordance with Party B’s request,
the insurance compensation can be freely disposed of.

During the security period, any third party’s activity caused the insufficient
value of collateral, Party A should re-provide new collateral which Party B
agreed. Part of collateral whose value did not decrease shall remain as
collateral of debt.
 
 
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8.  
Disposal of collateral

a.  
During the duration of the security, without Party B’s permission, Party A shall
not grant, transfer, lease, use as collateral for another debt, transfer or
otherwise dispose of the collateral under the contract.

b.  
During the duration of the security, Party A shall obtain written consent from
Party B before disposition of the collateral. Party A agrees that Party B has
the right to choose between the following ways of disposal:

1)  
Settle or early repayment of debt principal, interest and related costs under
the main contract;

2)  
Transfer into deposit and use the deposit certificate as collateral;

3)  
Deposit to Party B’s designated third party;

4)  
After Party A provides the new collateral in accordance with Party B’s request,
the insurance compensation can be freely disposed of.

9.  
The realization of the right to collateral

When the following situation happened, Party A agrees that Party B shall have
the right to auction, to sell at a discount or to sell the collateral:
a.  
The repayment of all or part of the principal or interest under the main
contract are due and Party B does not receive the repayment;

b.  
Other situations where Party B can realize its debt claims ahead of schedule
under the main contract.

Whether through sell at a discount or auction of the collateral, if the sale
value of the collateral is lower or higher than the agreed value, the scope of
the security is based on the realized value of the collateral. Party B shall
have the priority right.
   
10.  
Default and process

During the duration of the security, if Party A breaches the first, sixth,
seventh, eighth, and ninth articles, Party B shall have the right to ask Party A
to correct within a specific period, provide appropriate security, compensate
for the damages, and the right to dispose the collateral in advance.
Party A agrees that Party B shall choose the following methods:
a.  
Settle or early repayment of debt principal, interest and related costs under
the main contract;

b.  
Transfer into deposit and use the deposit certificate as collateral;

c.  
Deposit to Party B’s designated third party;

d.  
After Party A provides the new collateral in accordance with Party B’s request,
the insurance compensation can be freely disposed of.

11.  
Expenses

The assessment, notary, insurance, registration, identification, storage, and
escrow and other expenses under this agreement shall be borne by Party A.

12.  
The applicable law and dispute resolution

The agreement is governed the laws of PRC.
The dispute shall be settled through negotiation. Otherwise, it shall be
resolved by the method 1 of the following:
a.  
File a suit in Party B’s local court.

b.  
File for arbitration with Shenzhen Arbitration Commission (the place of
arbitration is in Shenzhen) based on the Commission’s current regulation.

c.  
File for arbitration with China International Economic and Trade Arbitration
Commission (the place of arbitration is in Shenzhen) based on the Financial
Disputes Arbitration Rules.

During the arbitration, the articles of the contract which are involved in the
dispute shall be performed.
 
 
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13.  
Collateral lists

As following:
 
Collateral list

Name
Certificate and number
Location
Value shown on the invoice of collateral
Appraisal value of collateral
The value which has been set up for other security
Note
New Energy Systems Group
           

 
14.  
The contact shall become effective after fulfilled the following conditions

a. 
This agreement shall be signed and sealed by both Parties

b. 
The “Collateral list” in this agreement which need to register has been
registered.

 
15.  
This agreement has 4copies.

 
16.  
Statement terms

a. 
Party A is clearly aware of the scope of Party B’s business and authorized scope
of business.

b. 
Party A has read all the terms of the agreement and paid particulate attention
to the contract terms in black font. Based on Party A’s request, Party B has
made the corresponding explanations. Party A fully understands the terms of this
agreement and the legal consequences.

c. 
Party A is authorized to sign this agreement.

Party A (Official Seal):
Legal representative or Authorized person: Weihe Yu
 

      4/21/2011  

 
Party B (Official Seal):
Legal representative or Authorized person: Pingui Zhang

      4/21/2011  

 
 
 
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