Unassociated Document


    EXHIBIT
      10.5

     

    DBS

     

    Our
      reference number: P/SHNY/00823/07

     

    Date:
      August 17, 2007

     

     

    Shenzhen
      High Power Technology Co., Ltd.

     

    Building
      A2, Luoshan Industrial Zone, Shanxia, Pinghu Town, Longgang District,
      Shenzhen

     

     

    To
      whom
      it may concern:

     

     

    Bank
      Credit Line: Shenzhen Highpower Technology Co., Ltd. 

    (
      “Borrower”)

     

    Our
      bank,
      DBS Bank (China) Limited Shenzhen Branch together with its successor and
      transferee (“Bank”) hereby notifies you with pleasure that the Bank now
      contemplates to provide you as Borrower (as shown in detail in Appendix 1)
      with
      the following bank credit line (“Credit Line”) according to the terms and
      conditions set out below. The Bank can examine the Credit Line at any time
      (including the annual auditing thereof conducted as per the practices of the
      Bank and customary bank practices). The Bank has the right and may elect (but
      is
      under no obligation) to issue, after the auditing, a notice on the extension
      of
      the Credit Line to the Borrower or any collateral provider and/or any guarantor.
      Whether such a notice is issued or not does not prejudice any right and power
      of
      the Bank under this letter and/or any guarantee or mortgage document.


     

    Where
      the
      Borrower uses the Credit Line simultaneously in foreign currency and RMB, (i)
      the total principal of loans in all currencies that the Borrower has drawn
      and
      not yet repaid and that the Borrower has not yet actually drawn after sending
      a
      drawing notice to the Bank shall not exceed the limit prescribed by the
      individual Credit Line hereunder at any time; (ii) the total value of the
      letters of credit in all currencies (if applicable) that the Borrower has
      already opened and has not yet actually opened after filing an opening
      application with the Bank and the total value of guarantees and other contingent
      liabilities shall not exceed the limit prescribed by the individual Credit
      Line
      hereunder at any time. For purpose of calculation of Credit Line, the exchange
      rates between foreign currencies and between foreign currencies and RMB
      hereunder shall be translated into equivalent benchmark currency as per the
      exchange rate published by the Bank from time to time.

     

    Credit
      Line:

     

    
      	1.  	
              Accounts
                payable financing: RMB 28,000,000 Yuan (uncommitted credit
                line)

            


    

     

    Purpose
      of Loan: Working capital

     

    Payment:
      Loan is released against the trust collection receipt provided on the basis
      of
      supplier invoice in either original or duplicate (duly verified by the Borrower
      as certified copy). 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    For
      each
      drawing, the Borrower shall submit to the Bank all documents related to the
      accounts payable as required by the Bank, including but not limited to invoices,
      sales contract and transport documents (if applicable), in content and form
      satisfactory and acceptable to the Bank. The payment under this Credit Line
      shall be made directly to the related suppliers. 

     

    Clauses:
      The longest financing term of each invoice is 120 days, minus:

     

    
      	(1)  	
              Term
                of supplier’s charge account (if any); and


            


    

     

    
      	(2)  	
              Where
                payment is made to a supplier after expiry of payment day, the elapsed
                term commencing from the date of
                expiration.

            


    

     

    The
      suppliers of accounts payable and the specific limit for each of them shall
      be
      subject to the prior written approval granted by the Bank to according to
      specific cases (if so required by the Bank). The Bank may do the company search
      against the suppliers of accounts payable financing at the expense of the
      Borrower. All related fees and expenses could be drawn from the account of
      the
      Borrower.

     

    Service
      Charges of Accounts Payable Financing

     

    First
      Installment: RMB 400.000 Yuan 1/4%

     

    Balance
      1/8%

     

    Interest:
      The interest payable for each loan shall be calculated and collected at a rate
      that is 45% higher than the legal loan interest rate of the relevant grade
      published by the People’s Bank of China on the day the loan is released.


     

    
      	2.  	
              Negotiate
                documentary letter of credit (with recourse) with
                variance

            


    

     

    USD
      equivalent to RMB 10,000.000 (uncommitted credit line) 

     

    Purpose
      of loan: The loan will be used to clear off the outstanding part (if any) of
      the
      account payable financing that the Borrower owes to the Bank first before the
      balance can be used as current capital. 

     

    Subject
      to recourse against the Borrower, the Bank will negotiate documentary letters
      of
      credit and/or drafts that are acceptable to it, but have variance.
      Notwithstanding anything to the contrary herein contained, the Bank can, at
      any
      rate and in its own absolute discretion, decide to refuse to negotiate any
      documentary letter of credit and/or draft that have
      any
      variance deemed unacceptable by the Bank. 

     

    Interest

     

    As
      per
      the standard US draft interest rate published from time to time by the Bank,
      provided that Bank can decide to change the loan interest rate from time to
      time
      in its own absolute discretion. 

     

    
      	3.  	
              Factoring
                financing service: USD 6,000,000 (uncommitted credit line)
                

            


    

     

    Purpose
      of Loan:
      The loan
      will be used to clear off the outstanding part (if any) of the account payable
      financing that the Borrower still owes to the Bank first 

     

    The
      terms
      and conditions of the factoring financing service agreement will be specified
      in
      Appendix 3 and the factoring agreement. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Service
      Charges of Credit Line and Other Expenses: 

     

    The
      Bank
      has the right to collect Service Charges and other fees for related Credit
      Line,
      including but not limited to loan arrangement fees and the Service Charges
      for
      loan extension (including drawing and extension). All fees shall be collected
      according to the standard existing rules of the Bank, unless otherwise
      stipulated in a separate agreement or this letter. 

     

    Precondition:
      As
      a
      precondition for the Bank to provide or continue to provide the Credit Line,
      the
      Borrower must provide the documents, items and evidences listed in Appendix
      2 in
      a form and content satisfactory and acceptable to the Bank (unless otherwise
      approved by the Bank). 

     

    Most
      Preferential Interest Rate:
      Unless
      otherwise stipulated herein, the most preferential interest rate means that
      of
      Hong Kong Dollars published from time to time by DBS (Hong Kong) Limited. If
      the
      interest rate of any Credit Line is expressed as the most preferential rate
      published from time to time by the Bank plus a margin, the Bank may decide
      in
      its reasonable discretion to use the interest rate of “Hong Kong Interbank
      Offered Rate plus 0.5%” in lieu of the most preferential interest rate without
      consulting or notifying the Borrower to calculate the interest payable under
      the
      Credit Line. If the interest of any Credit Line is expressed as the most
      preferential interest rate published from time to time by the Bank minus a
      certain percentage, the Bank can decide in its reasonable discretion to use
      “Hong Kong Interbank Offered Rate plus 0.5%” to calculate the interest payable
      on the Credit Line under the Credit Line. 

     

    Business
      day:
      Unless
      otherwise stipulated herein, business day means the days when the business
      places of the Bank and the commercial banks in the major financial centers
      of
      the
      denominated currencies
      of related Credit Line (or part thereof) are open for business (excluding
      Saturday, Sunday and other public holidays). If any payment day, repayment
      day
      or interest payment day is not a business day, the day shall be adjusted to
      the
      next or previous business day by the Bank in its sole discretion. If any
      repayment day or interest payment day has no date of the same number in a month,
      the day shall be adjusted to be the last day of the month. 

     

    Interest
      applicable to overdue repayment of Credit Line in foreign currency:
If
      any
      amount hereunder remains outstanding on the day it falls due or the Credit
      Line
      used exceeds the limit allowed for the Credit Line in that currency, the
      Borrower shall pay interest for the overdue repayment or the amount in excess
      thereof at an interest rate that is the interest rate of the Bank then in force
      for overdue repayment or exceeded limit, which can be collected in the form
      of
      compound interest each month or in other cycle as the Bank may decide from
      time
      to time. If any amount becomes overdue, the Bank may raise the interest rate
      of
      all the amounts still owed hereunder without prejudice to its other rights.
      

     

    Interest
      applicable to overdue Credit Line in RMB:
      If any
      loan/financing hereunder remains outstanding on the day its falls due, the
      Borrower shall pay interest from the day of expiration at the interest rate
      prescribed by the Bank from time to time for delayed repayment (the Borrower
      may
      inquire the Bank about the interest rate applicable to delayed repayment from
      time to time) until all the principal and interest of the loan/financing are
      repaid. In case of any adjustment to the interest rate for delayed repayment,
      interest calculation shall be based on separate periods. For the interest that
      cannot be paid on time during the term of loan/financing, compound interest
      will
      be collected at the interest rate for delayed repayment. The above interest
      rate
      for delayed repayment is set and adjusted in reference to the relevant
      guidelines and regulations issued by the People’s Bank of China from time to
      time. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Penalty
      Interest on Diverted Credit Line in RMB:
      Without
      prejudice to the other rights of the Bank hereunder, the Borrower shall pay
      penalty interest at a rate equal to the annual loan interest rate agreed by
      and
      between the Borrower and the Bank hereunder plus 50% for any failure to use
      any
      loan toward the purpose specified herein starting from the day of diversion.
      The
      calculation of penalty interest will be based on separate periods in case of
      any
      adjustment made to the interest rate thereof from the day the relevant loan
      is
      diverted to the day it is repaid in full. For the interest that cannot be paid
      on time during the diversion of the loan, compound interest will be collected
      on
      a monthly basis at the penalty interest rate for diversion. If the adjustment
      made by the People’s Bank of China to the penalty interest rate for diversion
      causes the penalty interest rate for diversion hereunder to be applicable no
      longer or in need of corresponding adjustment, the Bank reserves the right
      to
      revise the penalty interest rate for diversion subject to a prior notice given
      to the Borrower. 

     

    Establishment
      fee:
      USD
      7000

     

    Calculation
      of Interest:
      Unless
      otherwise stipulated herein, interest will be cumulative on a daily basis and
      calculated in reference to the elapsed days or on the basis of 365 days a year
      (for credit in HK$, pound, Singapore dollars or Malaysian Ringgit), or a year
      of
      360 days when the annual interest rate is converted to daily interest (if for
      any approved credit in foreign currency and/or RMB).

     

    Payment:
      All the
      payments hereunder shall be made in the currency of the released loan under
      the
      Credit Line (or any part thereof) or in the currency in which related payments
      have been made (as the case may be) as instructed by the Bank. In whichever
      case, the payment shall be made in immediately available capital without any
      debt set-off or recourse and deduction or withholding for any tax, taxation
      or
      collection of fees of whatever nature. If any payment received by the Bank
      deviates from the currency specified above, the Bank has the right to convert
      the amount to the currency specified above at the exchange rate then published
      by the Bank and according to its business practices as soon as possible after
      receipt thereof (the currency conversion shall not contravene any related law
      and regulations of China), while the Borrower shall make up any insufficiency
      to
      the Bank. In any event, the Borrower must pay to the Bank all the expenses
      incurred by the conversion thereof. 

     

    Fees
      and Expenses:
      The
      Borrower must pay the stamp tax related hereto (including the part payable
      by
      the Bank). Without prejudice to the preceding paragraph and irrespective of
      whether any amount has been released to the Borrower under this letter or other
      documents or whether the Borrower has used any Credit Line, the Borrower shall,
      if so required by the Bank, pay all the following fees and expenses incurred
      reasonably and properly by the Bank (including but not limited to registration
      fee, inspection fee of mortgaged machinery and equipment (if applicable), agent
      charges, legal cost and the charges of other professional consultants collected
      on the basis of full indemnity, travel expenses, communication fees, publicity
      costs, other fees and expenses); all fees and expenses incurred in connection
      with the preparation, consultations and conclusion of this letter, common
      commercial agreement and other guarantee documents (collectively “Loan
      Documents”) to be issued by the Borrower or other guarantor/collateral provider;
      all fees and expenses incurred in connection with the fulfillment, preservation
      or protection of any right under the Loan Documents; or all fees and expenses
      incurred in connection with the exercise or execution or attempted exercise
      or
      execution of any right under the Loan Documents.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    For
      as
      long as the Credit Line continues to exist, the Borrower shall bear the Service
      Charges for the audit carried out by the Bank each year by paying the amount
      decided by the Bank. The charges may be drawn from the account of the
      Borrower.

     

    Commitments:
      The
      Borrower hereby commits itself to the following for the benefit of the
      Bank:

     

    
      	(a)  	
              The
                Borrower will compile and maintain account books and financial statements
                in accordance with applicable Chinese laws and regulations and generally
                recognized accounting principles and
                practices;

            


    

     

    
      	(b)  	
              The
                Borrower shall:

            


    

     

    
      	(i)  	
              submit
                to the Bank audited (and consolidated, if appropriate) accounts and
                reports of directors and auditors for each fiscal year as soon as
                possible
                when the same becomes available for submission, but in any way within
                10
                months after the end thereof and, if reasonably required by the Bank,
                submit to the Bank all the other information relating to its financial
                position and business that is required by the Bank as soon as
                possible;

            


    

     

    
      	(ii)  	
              inform
                the Bank of details on any existing or (to the best of its knowledge)
                upcoming major lawsuit, arbitration or administrative proceedings
                instituted by or against it as soon as reasonably
                possible.

            


    

     

    
      	(c)  	
              The
                Borrower will inform the Bank of any change to its directors or any
                revision of its contract (if any) and bylaw as soon as
                possible;

            


    

     

    
      	(d)  	
              The
                Borrower shall inform the Bank of any factor that may prohibit, impair
                or
                delay the fulfillment of the obligations under the Loan Documents
                by the
                Borrower or any guarantor/collateral provider as soon as possible
                after it
                becomes aware of the same; 

            


    

     

    
      	(e)  	
              The
                Borrower will keep the value of its net assets always at a level
                not lower
                than RMB 80,000,000Yuan; 

            


    

     

    
      	(f)  	
              Without
                the prior written consent of the Bank, the Borrower will not announce
                the
                distribution of any dividend;

            


    

     

    
      	(g)  	
              The
                Borrower will refer no less than HK$ 60,000.000 of its factoring
                finance
                to the Bank every half a year; 

            


    

     

    
      	(h)  	
              All
                transactions involved in the trade finance under the Credit Line
                are true,
                fair, equitable, normal and legal. All persons involved the transactions,
                including but not limited to the beneficiary of any letter of credit,
                supplier and buyer (as the case may be), are persons and/or companies
                of
                no affiliation with the Borrower. If the above transactions involve
                any
                person and/or company affiliated with the Borrower, the Borrower
                undertakes to voluntarily and immediately reveal the relevant relationship
                to the Bank, provide all the information as the Bank may require
                and hold
                up the relevant transaction and use of related trade finance before
                the
                Bank grants approval. 

            


    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	(i)  	
              (i)
                For purpose of the performance guarantee provided by an overseas
                guarantor
                for this Credit Line, the Borrower shall go through the formalities
                for
                registration of foreign debts with the local foreign exchange
                administration within fifteen (15) days after the expiration day
                of the
                overseas guarantor; (ii) when going through the formalities for
                registration of foreign debts with the local foreign exchange
                administration, the Borrower shall own sufficient investment balance;
                and
                (iii) the Borrower shall take necessary measures to ensure that all
                outstanding debts it owes to the Bank under the Credit Line will
                be repaid
                to the Bank in the same currency as the Credit Line. Investment balance
                means the balance of the total investment of the Borrower minus its
                registered capital, the accumulative amount of medium and long-term
                foreign debts and short-term foreign debts.


            


    

     

    
      	(j)  	
              The
                Borrower will obtain and make sure that all related guarantors and/or
                collateral providers obtain any approval, registration and/or filing
                relating to the Loan Documents and keep the same valid until full
                repayment of all Credit Line. When the certificate thereof is obtained,
                the original or duplicate verified by the Borrower or guarantor or
                collateral provider (as the case may be) as a signed duplicate thereof
                shall be delivered to the Bank for keeping.


            


    

     

    Restrictions
      on Obligations of Providing Credit Line: 

     

    Within
      the validity term of the Credit Line hereunder, the Bank’s provision of Credit
      Line for the Borrower shall be conditional upon the ability of the Bank to
      raise
      the funds for the Credit Line. If the Bank is unable to provide the Borrower
      with the Credit Line hereunder, either in whole or in part, because of the
      restrictive regulations on interbank borrowing or other restrictive regulations
      promulgated for implementation by the People’s Bank of China/China Banking
      Regulatory Commission, the Credit Line hereunder shall be transferred to credit
      line in other currency according to the applicable laws and regulations and
      usable funds of the Bank. The Borrower expresses complete consent to and will
      fully cooperate with any disposal and arrangement made by the Bank in relation
      thereto and hereby agrees that the Bank will bear no responsibility whatsoever
      to the Borrower during the period. 

     

    Temporary
      Credit Line and Excess of Limit: 

     

    In
      its
      absolute discretion, the Bank may (but is under no obligation to) provide to
      the
      Borrower, at its request, temporary Credit Line and/or transitory permission
      for
      amount already used to exceed the limit of the original Credit Line. Without
      prejudice to the power of the Bank under the clause “Require Repayment of Credit
      Line”, all the amounts due hereunder (including principal, interest, fees and
      other funds) shall be paid promptly according to the instructions of the Bank.
      If the Borrower fails to fulfill its obligations hereunder or fulfill its
      obligations in a way agreed, thereby causing losses or damage to the Bank,
      the
      Borrower shall indemnify the Bank for the losses by paying an amount
      commensurate with the losses so caused. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Require
      Repayment of Credit Line:

     

    
      	(a)  	
              Without
                prejudice to paragraph (b) below, if the Borrower fails to pay any
                amount
                payable hereunder on time, or the Borrower fails to fulfill any other
                obligations prescribed by this letter or any other Loan Documents,
                or the
                Borrower fails to repay any other debts, in whole or in part, on
                the
                agreed expiration date, or such debts are declared to fall due prematurely
                before the expiration date due to the breach of contract by the Borrower,
                or any other creditor of the Borrower has the right to declare that
                the
                Borrower’s debts have fallen due and payable before the agreed expiration
                date, or the Borrower is declared insolvent or dissolved, or the
                secured
                mortgage document hereunder has expired or is invalid or illegal;
                the Bank
                can cancel the Credit Line or any part of it in real time and/or
                require
                immediate repayment or payment (as the case may be) of all the principal,
                interest, expenses and other funds that remain outstanding hereunder
                or
                any part thereof (“Liabilities”) and/or require the Borrower to
                immediately provide cash guarantee for all Liabilities. Then, the
                Credit
                Line or the part of it shall be cancelled in real time and/or the
                Liabilities shall fall due immediately and/or the cash guarantee
                shall be
                provided immediately. 

            


    

     

    
      	(b)  	
              Notwithstanding
                anything in any other clauses hereof (including above paragraph (a)),
                in
                any event, the Bank can decide, at any time without the need to notify
                the
                Borrower and in its own absolute discretion, to cancel the Credit
                Line or
                any part of it in real time and/or require immediate repayment or
                payment
                (as the case may be) of all the principal, interest, expenses and
                other
                funds that remain outstanding hereunder or any part thereof
                (“Liabilities”) and/or require the Borrower to immediately provide cash
                guarantee for all Liabilities. Then, the Credit Line or the part
                of it
                shall be cancelled in real time and/or the Liabilities shall fall
                due
                immediately and/or the cash guarantee shall be provided
                immediately.

            


    

     

    
      	(c)  	
              Notwithstanding
                anything in the above paragraph entitled “Payment” (applicable where the
                Bank has not required repayment) and under the precondition that
                any prior
                claim is not contravened, all the amounts received by the Bank at
                any time
                after exercising the right in above paragraph (a) or (b) shall be:
                

            


    

     

    First,
      used for or toward payoff of all fees and expenses incurred by the Bank in
      connection with the fulfillment, preservation and exercise or attempted
      fulfillment, preservation and exercise of its rights under the Loan
      Documents;

     

    Then,
      used for or toward payment of all outstanding Liabilities in the sequence and
      manner specified by the Bank;

     

    Lastly,
      pay to the Borrower in the form of any balance thereof without contravening
      the
      right of any third party actually known to the Bank.

     

    Default
      Liabilities: If
      the
      Borrower fails to fulfill its obligations hereunder in accordance with the
      clauses hereof, thereby causing losses or damage to the Bank, the Borrower
      shall
      indemnify the Bank for the loss or damage caused as a result of its breach,
      including benefits that could have been obtained but for the breach.


     

    Transfer:

     

    
      	(a)  	
              The
                Borrower may not transfer its rights or obligations hereunder, either
                in
                whole or in part; 

            


    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	(b)  	
              The
                Bank can transfer all or any of its rights and/or obligations hereunder
                by
                just giving a written notice to the Borrower without the need to
                seek the
                approval of the Borrower. Such transfer/update shall take effect
                from the
                date indicated in the notice. All references herein made to “the Bank”
                include any other persons merged or integrated with the Bank and
                the
                successor and transferee of the Bank, which shall be understood in
                such a
                way as to look as if the entity constituted by way of merger or
                acquisition or the successor or transferee of the Bank (as the case
                may
                be) had become a party hereto in lieu of the
                Bank.

            


    

     

    Information
      Policy:
      The
      Borrower agrees that the information policy, notices and/or other communications
      (copies thereof available from the Bank upon request) issued from time to time
      by the Bank (member of DBS Group) to the customers concerning the application
      of
      their information shall be applicable to all the information provided for the
      Bank by the Borrower in respect of the Loan Documents. The Borrower further
      agrees that all the information provided in any application, or obtained by
      the
      Bank from any source, or arising from the other transactions between the
      Borrower and the Bank (or any other member of DBS Group) (“Information”) will be
      subject to such policy, notices and/or other communications that can be revised
      from time to time. The Borrower specially agrees that:

     

    
      	(a)  	
              The
                Bank can verify, provide and collect the Information on the Borrower
                with,
                for or from other organizations, institutions or other
                persons;

            


    

     

    
      	(b)  	
              The
                Bank can transfer the Information to other places than the business
                places
                of the Bank, including but not limited to Hong Kong Special Administrative
                Region and Singapore; and 

            


    

     

    
      	(c)  	
              The
                Bank can compare any Information it has obtained with the Information
                of
                the Borrower before taking any action on the basis of the results
                obtained, including actions that may be adverse the interests of
                the
                Borrower (including refusal to accept any
                application).

            


    

     

    The
      Borrower agrees to accept the constraints of the clauses of such information
      policy, notices and/or other communications, which shall form an integral part
      of the agreement concluded by and between the Borrower and the Bank.


     

    Relationship
      with Directors/Employees: As
      a
      licensed bank, the Bank is subject to some restrictions on the release of loans
      to the directors, or employees or other relevant persons of the Bank or other
      members of DBS Group. By signing this letter, the Borrower confirms to the
      Bank
      that it has no relationship with any director or employee with the members
      of
      DBS Group in any aspect. The Borrower undertakes to give a written notice to
      the
      Bank immediately after entering into such relationship at any time while the
      Bank continues to provide the Borrower with Credit Line or any loan or other
      debts owed to the Bank still remain outstanding. 

     

    Miscellaneous:

     

    
      	(a)  	
              Without
                prejudice to any other clause hereof, the Borrower can request at
                any time
                to repay all the amounts due under the Credit Line or any part thereof
                ahead of schedule after obtaining the approval of the Bank and satisfying
                all the conditions set forth by the Bank (including the requirement
                for
                the Borrower to pay the interest that the Bank could have collected
                from
                the moved-up date of repayment to the original expiration date at
                the
                interest rate herein specified or pay the extra capital cost or loss
                caused to the Bank by the advance repayment of the Credit
                Line);

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	(b)  	
              Time
                is an element hereof, but the failure or delay of the Bank to exercise
                or
                execute any right or remedial measure shall not be deemed waiver
                of the
                Bank to exercise or execute the right or remedy, while the single
                or
                partial or insufficient exercise or execution of any right or remedy
                by
                the Bank shall not preclude the Bank from further exercising or executing
                the right or remedy or exercising or executing any other right or
                remedy.
                The right and remedies herein contained shall be cumulative. The
                Bank can
                exercise the same whenever it sees fit without excluding any other
                right
                or remedy vested in the Bank by laws and regulations. The Borrower
                must
                notify the Bank immediately of any change to its address for notices.
                Such
                change can take effect only after it is properly recorded by the
                Bank.
                

            


    

     

    
      	(c)  	
              Any
                notice or other communication sent to the party hereto shall be deemed
                delivered:

            


    

     

    
      	(i)  	
              on
                the day of sending if it is sent by the Bank to the Borrower via
                a letter;
                or on the day of delivery to the relevant address if it is sent by
                the
                Borrower to the Bank via a letter; 

            


    

     

    
      	(ii)  	
              on
                the day of transmission if it is sent via fax, provided that the
                day of
                transmission is a working day at the location of the receiving party;
                or
                on the first working day immediately after the day of transmission,
                if the
                day of transmission is not a working day at the location of the receiving
                party;

            


    

     

    
      	(iii)  	
              The
                Borrower must notify the Bank immediately of any change to its address
                of
                receiving notices and/or faxes. Such change can take effect only
                after it
                is properly recorded by the Bank.

            


    

     

    
      	(d)  	
              If
                any clause hereof is illegal, invalid or unenforceable under the
                laws of
                any judicial jurisdiction, the legality, validity or enforceability
                of any
                other clause hereof under the laws of the judicial jurisdiction and
                the
                legality, validity or enforceability of such clause in other judicial
                jurisdiction shall not be affected.

            


    

     

    Common
      Commercial Agreement:
      The
      clauses of the common commercial agreement duly signed by the Borrower on April
      24, 2006 (including but not limited to clauses on interest period) are also
      applicable to this letter. The terms and conditions thereof constitute an
      integral part hereof. In case of any contradiction between the terms and
      conditions of the common commercial agreement and those hereof, the latter
      shall
      prevail. 

     

    Laws:
      This
      letter shall be governed by the laws of the People’s Republic of China (“China”)
      and both parties accept the nonexclusive judicial jurisdiction of Chinese court.
      The preceding clause shall not restrict the right of the Bank to execute this
      letter in any other judicial jurisdiction. If any dispute arising from this
      letter or in connection therewith is brought before a Chinese court, it shall
      be
      a court at the location of the Bank. 

     

    Effectiveness:
      This
      letter takes effect the moment it is signed and returned by the Borrower.
      However, if this letter must be approved, registered and/or filed by or with
      any
      authority before taking effect under the Chinese laws and regulations, it shall
      take effect on the day such approval, registration and/or filing procedures
      are
      duly completed. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Please
      kindly sign the counterpart hereof and return it to the Bank, attention: Mr.
      Yu
      Wentang, within one month after the date hereof, thereby indicating that you
      understand and accept this offer. After the above time limit, this offer will
      automatically cease to be in force (unless otherwise approved by the Bank).
      The
      Credit Line mentioned herein is a renewal, extension, revision and/or
      supplementation of the Credit Line already released. Subject to your acceptance
      hereof, this letter will supercede the previous letter of the Bank on the said
      Credit Line, which is dated April 18, 2006, with the reference number
      P/SFHFB/00056/06.

     

    Enclosed
      herein please find a full set of documents you are expected to sign and return
      to the Bank. If you have any question, please contact Mr. Yu Wentang of the
      Bank
      by dialing (86-755) 8269-0977.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    The
      Bank
      takes great pleasure in serving you. 

     

    DBS
      Bank (China) Limited Shenzhen Branch

     

    /s/
      Illegible Signature

     

    SW/yw

     

    With
      appendixes

     

     

    
      	
              Please
                note: 

               

              This
                letter is a very important legal document. Before signing it, you
                are
                advised to carefully it and, if necessary, seek independent legal
                opinion
                to ensure that you understand your responsibilities hereunder and
                all
                consequences of signing this letter. You should sign this letter
                only if
                you agree to be bound by the terms and conditions
                hereof.

            


    

     

    We
      hereby
      confirm that you have warned us about and explained to us all the terms and
      conditions of this Letter of Credit Line. We fully understand and agree to
      accept all the terms and conditions hereof and are willing to be bound by them
      unconditionally. We further agree that you have the right to change, terminate,
      recover or cancel the Credit Line you have agreed to provide to us without
      the
      need to give us any prior notice and undertake to immediately repay all the
      outstanding debts under the Credit Line once you require us to.

     

     

    Shenzhen
      Highpower Technology Co., Ltd. 


     

    By:           
      /s/
      Dang Yu
      Pan                                             


    Legal
      Representative/Authorized Agent

     

     

    Date
      when
      Borrower signs and returns this letter: 

     

     

    Common
      Seal: Shenzhen Highpower Technology Co., Ltd. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Appendix
      I 

     

    Data
      of Borrower

     

     

    
      	
              Borrower:
                

            	
              Shenzhen
                Highpower Technology Co., Ltd.

            
	
              Registration
                Number of Business License: 

            	
              Qi
                Du Yue Shen Zong Di 317218

            
	
              Legal
                Address: 

            	
              Building
                A2, Luoshan Industrial Zone, Shanxia, Pinghu Town, Longgang District,
                Shenzhen

            
	
              Legal
                Representative

            	
              Pan
                Dangyu

            
	
              Address
                for Notices

            	
              Building
                A2, Luoshan Industrial Zone, Shanxia, Pinghu Town, Longgang District,
                Shenzhen

            
	
              Fax
                Number

            	 


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Appendix
      2:
      

     

    Preconditions

     

    
      	1.  	
              Common
                commercial agreement in the standard format of the Bank duly signed
                by the
                Borrower;

            


    

     

    
      	2.  	
              (i)
                Deposit pledge contract in the standard format of the Bank duly signed
                by
                the Borrower and duly notarized or
                witnessed;

            


    

     

    (ii)
      No
      less than RMB 17,000,000 Yuan saved by the Borrower in the Bank as pledge
      deposit.

     

    
      	3.  	
              Letter
                of full amount guarantee and compensation in the standard format
                of the
                Bank duly signed by Hong Kong Highpower Technology Company Limited
                (“HK
                Company Guarantor”), which is duly notarized or witnessed;
                

            


    

     

    
      	4.  	
              Letter
                of undertaking issued to the Bank by Pan Dangyu, Li Wenliang and
                Ma
                Wenwei, who shall have fulfilled related formalities for the letter
                of
                undertaking in accordance with all applicable laws to make it legal
                and
                valid;

            


    

     

    
      	5.  	
              Factoring
                agreement in the standard format of the Bank duly signed by the
                Borrower;

            


    

     

    
      	6.  	
              Business
                license of legal entity (original and duplicate) and signed duplicate
                of
                approval certificate of the Borrower that have received annual
                examination; 

            


    

     

    
      	7.  	
              Documents
                of incorporation (including but not limited to latest contract/agreement
                for joint venture/joint operation), latest bylaw and signed duplicate
                of
                revised version thereof of the
                Borrower;

            


    

     

    
      	8.  	
              Signed
                duplicate of the organization code certificate of the Borrower;
                

            


    

     

    
      	9.  	
              Signed
                duplicate of capital verification report (if applicable) issued by
                Chinese
                certified public accountant to prove that the Borrower has paid up
                the
                registered capital; 

            


    

     

    
      	10.  	
              Signed
                duplicate of list of members of the board of directors of the Borrower;
                

            


    

     

    
      	11.  	
              Board
                resolution or abstract of board resolution of the Borrower that approves
                the signing of this letter and other related documents and specimen
                of the
                seal or signature of authorized signatory;


            


    

     

    
      	12.  	
              Duplicates
                of ID cards and personal signatures or private seals of all directors
                who
                have signed the above board resolution or abstract of resolution
                of the
                Borrower and all authorized signatories;


            


    

     

    
      	13.  	
              Duplicate
                and password of the valid loan card of the
                Borrower;

            


    

     

    
      	14.  	
              The
                Borrower has opened the RMB and/or USD accounts needed by the
                Bank;

            


    

     

    
      	15.  	
              The
                Borrower has paid loan Service Charges and other fees payable to
                the Bank;
                

            


    

     

    
      	16.  	
              Signed
                duplicates of latest incorporation documents and bylaw of HK Company
                Guarantor;

            


    

     

    
      	17.  	
              Board
                resolution or abstract of board resolution of HK Company Guarantor
                concerning related guarantee and mortgage and specimen of the seal
                or
                signature of authorized signatory;

            


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	18.  	
              Duplicates
                of ID cards and personal signatures or private seals of all directors
                and
                shareholders who have signed the above resolutions of the board and
                shareholders’ meeting or abstract of resolution of HK Company Guarantor
                and mortgagor and all authorized signatories;


            


    

     

    
      	19.  	
              Signed
                duplicate of identity certificate for a undertaker of personal status;
                

            


    

     

    
      	20.  	
              Certificate
                of stamp tax paid by the Borrower for this letter;
                

            


    

     

    
      	21.  	
              Evidences
                proving that the Borrower has completed loan registration and opened
                the
                necessary accounts required for the Credit Line in accordance with
                relevant laws and regulations; 

            


    

     

    
      	22.  	
              Other
                documents, items or evidences required by the Bank, including the
                documents of approval, registration and/or filing as well as the
                legal
                opinion relating to this letter, any Credit Line hereunder and relevant
                guarantee and/or mortgage. 

            


    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Appendix
      3

     

    Disclosed
      terms and conditions for factoring finance service,
      including:

     

    
      	a)  	
              Advance
                

            


    

     

    The
      Bank
      can decide in its sole discretion to provide the Borrower with advance before
      the payment day for amounts due of qualified drawings;

     

    
      	b)  	
              Management
                of Collection and Accounts Receivable


            


    

     

    The
      management service provided by the Bank for accounts receivable include managing
      the sales ledger of the Borrower, issuing monthly statements to its debtors
      and
      collecting accounts receivable from its debtors; 

     

    
      	c)  	
              Insurance
                against Credit Risks

            


    

     

    The
      Bank
      will take out insurance against credit risks in its own name with agency
      collectors or credit underwriter, which shall be subject to the clauses of
      insurance against credit risks established by the agency collector or credit
      underwriter. 

     

    
      	1.  	
              (a)
                Limit of Advance for Customers: USD
                6,000,000

            


    

     

    (b)
      Percentage of Advance: 80%

     

    (c)
      Longest Period of Financing: 120 days from the date of invoice

     

    (d)
      Account Management Fee: Factoring without recourse—0.9%
      of
      invoice

     

    (e)
      Discount Fee Collection: Standard interest rate of the Bank for USD drafts
      plus
      0.5% a year

     

    (f)
      Interest rate for overdue amount: For advances in foreign currency, the interest
      is collected at a monthly rate of 2% of the overdue amount; for advances in
      RMB,
      the provisions in “Interest Applicable to Overdue Credit Line in RMB” hereof
      shall apply. 

     

    
      	2.  	
              The
                advance limit for the debtors of the Borrower will be paid after
                the Bank
                has completed a satisfactory evaluation of the debtors. The Bank
                reserves
                the right to audit and change the limit or decide in its own discretion
                to
                make no payment of the advance at all.


            


    

     

    
      	3.  	
              The
                Borrower shall notify all debtors in the written format specified
                by the
                Bank. 

            


    

     

    
      	4.  	
              All
                advances paid to the Borrower shall be paid into the account opened
                by the
                Borrower with the Bank after receipt of the advance payment instruction
                issued by the Borrower via fax. The Bank will bear no responsibility
                for
                any delay, loss or damage in observing the fax instruction or caused
                by
                the delay, illegibility or failed receipt of the fax instruction.
                

            


    

     

    
      	5.  	
              The
                accounts receivable of the Borrower shall be investigated before
                the
                account is activated and the terms and conditions specified in this
                letter
                (including this appendix) can be adjusted on the basis of the
                investigation results. The Bank can carry out regular investigation
                subsequently. If the Bank is unsatisfactory with any investigation
                result,
                it reserves the right to cancel this offer.


            


    

     

    
      	6.  	
              All
                the clauses of the factoring agreement (duplicate enclosed herewith)
                in
                the standard format of the Bank shall also be applicable after the
                revisions listed above are made. The Bank reserves the right to revise
                any
                term and condition of this letter (including this appendix) or the
                factoring agreement by giving the Borrower a written notice with
                effect
                starting from the date therein indicated.


            


    

     

    
      
        
        

      

      
        15