Notarization
      Certificate

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    中华人民共和国广东省广州市公证处

    GUANGZHOU
      NOTARY PUBLIC OFFICE OF THE PEOPLE’S REPUBLIC OF CHINA

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Loan
      Contract

    


    


    Borrower:
      Huizhou NIVS Audio & Video Technology Co., Ltd 

    Business
      license registration number: Guangdong Joint venture (Qi He Yue Zong Fu Zi)
      No.005100
      

    Address:
      No. 29, No.31, Town Ring West Road, Yongkou, Huizhou City 

    Legal
      representative: Li Tianfu 

    


    Lender:
      Nanyang Commercial Bank, Guangzhou Branch 

    Business
      license registration number: Guangdong Foreign venture (Qi Wai Yue Yin Fu Zi)
      No.00432
      

    Address:
      Unit 402, Citic Plaza, No. 233, North Tianhe Road, Tianhe District, Guangzhou
      City

    Principal:
      Song Weiguang 

    


    Huizhou
      NIVS Audio &Video Technology Co., Ltd (hereinafter referred to as “the
      Borrower”) applies for loan from Nanyang Commercial Bank, Guangzhou Branch
      (hereinafter referred to as “the Lender”) for its business needs. In order to
      safeguard legitimate rights and interests of the lender, the Borrower agrees
      to
      provide the land
      use
      right of the industrial land under its name (hereinafter referred to as
“Collateral I”) and
      the
      machinery equipment (hereinafter referred to as “Collateral II”) (hereinafter
      collectively referred to as “collateral”, see appendix A) as the guaranty, and
      invites Mr. Li Tianfu (Chinese resident ID number: 440106196907021813) to
      provide guarantee of joint and
      several liabilities in full amount, and NIVS International (Hong Kong)
      Corporation (Registration
      Number of Hong Kong Corporation: 932903) to provide collective and individual
      guaranty in full amount. The Lender will receive relevant collateral and
      guarantees, and grant the loan to the Borrower in a unified manner.


     

    
      
        
        

      

      
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    Upon
      consensus through negotiation, the Borrower and the Lender agree to enter into
      this
      loan
      contract (hereinafter referred to as “the Contract”) with the following
      provisions and
      comply with it. For the matters regarding mortgage(s) and guarantee(s), the
      Borrower will sign separate agreements with the mortgager(s) and the
      guarantor(s). 

    
 

    I.
      Loan Limit

    


    
      	1.	
              The
                loan limit that the Lender grants to the Borrower:

              Amount
                of Hypothecated Loans on Time: No
                more than sixteen million and six hundred thousand RMB (16, 600,
                000, 00
                RMB). 

            


      	 	 


    

    
      	2.	
              The
                Borrower agrees that the Lender may adjust the above loan limit including
                reducing the loan limit at any time; however, the Lender shall give
                a
                written notice to the Borrower after adjusting the Borrower’s loan limit.
                

            


    

    
 

    II.
      The intended use, loan term, withdrawal provisions, interest rate and the method
      of repayment of principal and interest for the loan limit

    


    All
      arrears shall be paid off by the due date of each withdrawal or within the
      term
      of the
      loan
      limit (the earlier one prevails). The Borrower agrees, notwithstanding any
      different stipulations under
      this contract, the Lender is entitled to request the Borrower to pay off all
      the
      arrears (no matter if they are substantive, contingent, due, undue, direct
      or
      indirect) hereunder promptly, including but not limited to the loan principal,
      interest, taxes, penalties, penal interest, overdue interest, overdraft
      interest, penalty interest, losses to the Lender and the expenses paid by the
      Lender for acting upon any of its rights under this
      contract (hereinafter referred to as “arrears”). Upon request of the Lender, all
      of the arrears shall
      be
      regarded as due. 

    When
      the
      Borrower meets the preconditions for the loan under this contract and obtains
      the consent from the Lender, the Borrower may withdraw the loan amount according
      to the following provisions: 

     

    
      
        
        

      

      
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      	1.	
              Intended
                use of the loan:

              The
                loan is to be used for the repayment of the Borrower’s loan balance to
                Huizhou branch of Agricultural Bank of China, and/or to replenish
                the
                Borrower's operating capital. 

            


      	 	 


    

    
      	2.	
              Loan
                term:

              The
                Loan term shall be three years since the date when the Lender notifies
                the
                borrower that the first loan limit is granted. It is only during
                the loan
                period that the Lender can request the Borrower to pay off the arrears
                in
                whole or partial at any time, the Borrower shall immediately do so.
                

            


      	 	 


    

    
      	3.	
              Withdrawal
                provisions 

            


      	 	 


    

    
      	
            	(1)	
              The
                Borrower shall withdraw the loan within six months from the date
                when the
                Lender
                notifies that the first loan limit is granted and the loan limit
                which has
                not been withdrawn will be automatically cancelled upon expiration
                of the
                loan term; 

            


      	 	 	 


    

    
      	
            	(2)	
              The
                Borrower shall withdraw the loan in two
                stages;

            


      	 	 	 


    

    
      	
            	a.	
              The
                first stage: the Borrower may withdraw an amount of no more than
                9 million
                RMB,
                which is exclusive for the purpose of the repayment the Borrower’s loan
                balance
                to Huizhou branch of Agricultural Bank of China. The Borrower shall
                submit
                a statement of balance (including all interests and expenses) from
                Huizhou
                branch
                of Agricultural Bank of China and the aforesaid valid original of
                “Withdrawal Application”
                within two business days prior to the scheduled withdrawal
                date, and the withdrawn amount shall be transferred to the Borrower's
                account
                opened in the bank
                of the Lender and remitted to Huizhou branch of Agricultural Bank
                of China
                for
                repayment.
                The Borrower shall provide relevant documents proving that the loan
                from
                Huizhou branch of Agricultural Bank of China has been paid off within
                five
                working days after the withdrawal, and the Lender shall verify it
                through
                the business credit information system of the People's Bank of
                China;

            


    

    
      
      

       

      
        
          
          

        

        
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              	b.	
                The
                  second stage: The Borrower cannot withdraw the remaining loan limit
                  until
                  it has paid off the outstanding balance to Huizhou branch of Agricultural
                  Bank of
                  China and went through the mortgage registration procedures for
                  the
                  collateral I; the
                  Borrower shall submit the effectively-signed original of the “Withdrawal
                  Application” within two business days prior to the scheduled withdrawal
                  date and the withdrawn amount shall be transferred to the Borrower's
                  account opened in the bank of the Lender and used to replenish
                  the
                  Borrower's operating capital. 

              


        	 	 	 


      

    

    
      	
            	
              c.

            	
              “Withdrawal
                Application” must clearly state the withdrawal date, amount of withdrawal
                and prompt (see Appendix II for the content and format of “Withdrawal
                Application”) of the account number to which the money being withdrawn is
                to be transferred. Once the “Withdrawal Application” is issued, it cannot
                be revoked. 

            


      	 	 	 


    

    
      	
            	(3)	
              The
                Lender has the absolute right to verify all the information submitted
                by
                the Borrower to decide whether to allow the Borrower to withdraw
                the loan.
                

            


      	 	 	 


    

    
      
        
          	
                	(4)	
                  The
                    sum of money repaid (including advance repayment) cannot be re-withdrawn.
                    

                


          	 	 	 


        

      

    

    
      	
              4.

            	
              Loan
                rate:

              The
                loan rate is calculated according to the loan benchmark rate of RMB
                announced by the People's Bank of China that is applicable to loans
                with
                1-3 years. Within the effective period of this loan limit, the interest
                rate can be reset every six months starting from the first withdrawal
                date. In case the People's Bank of China adjusts the loan benchmark
                rate,
                the interest rate under this loan limit shall be accordingly adjusted
                in
                accordance with relevant regulations of the People's Bank of
                China.

            


      	 	 


    

    
      	5.	
              Method
                of Repayment of the Principal and Interest:


            


      	 	 


    

    
      	
            	(1)	
              Loan
                principal: The loan principal shall be repaid by five installments.
                The
                date of the first principal repayment shall be the first day of 12
                months
                after the date when the Lender notifies that the first loan limit
                is
                granted, and subsequently every
                six months is one term of installment. For each installment of the
                first
                -fourth installments,
                four million RMB (4,000,000.00
                RMB) of the principal shall be repaid
                and the remaining loan principal is to be repaid by the date of loan
                maturity. If
                the withdrawal period expires and the loan limit has not been completely
                withdrawn, the amount for each installment of principal repayment
                shall be
                adjusted in proportion to the total amount of the actual withdrawal.
                

            


    

     

    
      
        
        

      

      
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            	(2)	
              Loan
                interest: the loan interest shall be paid once every three months
                from the
                date when the Lender notifies the grant of the first loan limit to
                the
                borrower. All interest
                shall be calculated based on the actual amount and the time elapsed
                since
                the
                date when the loan limit is granted; 

            


      	 	 	 


    

    
      	
            	(3)	
              In
                case that the date of repayment of the principal and interest is
                non-business day of the
                Lender, the first succeeding business day is the date of repayment
                of the
                principal and
                interest, and if the first succeeding business day falls into the
                next
                month, the date of repayment of the principal and interest is the
                last
                business day prior to the former date of repayment of the principal
                and
                interest. 

            


      	 	 	 


    

    
      	
            	(4)	
              The
                principal of each loan withdrawal must be repaid upon the expiration
                of
                the term of loan, and the interest must be paid off together with
                the
                principal.

            


      	 	 	 


    

    
      	
            	(5)	
              When
                the Borrower repays the outstanding payment to the Lender, unless
                requested otherwise by the Lender, the Borrower must firstly pay
                for the
                Lender the expenses (if any) arising from related business transactions
                with the Lender, and pay
                for all the fees and penalty interest (if any) mentioned in Part
                III of
                the contract, and
                then pay the interest in arrear and /or incurred, before finally
                repaying
                the loan principal; the Borrower hereby irrevocably authorizes the
                Lender
                to deduct any arrears that the Borrower shall pay the Lender from
                accounts
                the Borrower already opened or will open in the future; if any overdraft
                of relevant accounts occurs consequently, the Borrower shall guarantee
                to
                pay off the related overdrafts and the interest incurred
                immediately.

            


      	 	 	 


    

    
      	6	
              Advance
                Repayment: 

            


      	 	 


    

    
      	
            	(1)	
              In
                order to make any advance repayment of arrears partially or in whole,
                the
                Borrower must give a written notice to the Lender one month before
                the
                scheduled date of repayment, otherwise, the Lender is entitled to
                collect
                the interest on the loan generated from the date of advance repayment
                to
                the loan maturity date based on the amount of advance repayment;
                

            


    

     

    
      
        
        

      

      
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            	(2)	
              The
                notice of advance repayment is irrevocable once sent released;
                

            


      	 	 	 


    

    
      	
            	(3)	
              The
                date of advance repayment must be the date of repayment for each
                installment; 

            


      	 	 	 


    

    
      	
            	(4)	
              The
                amount of advance repayment shall be integral times of one million
                RMB and
                shall be not less than one million RMB (1,000000.00 RMB). Advance
                repayment shall be made to pay for arrears in a reverse sequence
                (first
                repay the arrear that will due last), however, the Lender shall reserve
                the rights to adjust the term and the amount of repayment.
                

            


    

    
 

    III.
      Fees and Penalty Interest

     

    
      	1.	
              Fees
                and taxes involved in this contract:

              The
                notarization fee, company search fees (the Borrower and the Guarantor),
                the collateral assessment fees, mortgage registration fees, mortgage
                insurance premiums of machinery equipment, stamp duty and other relevant
                fees and taxes involved hereunder in Appendix
                1
                shall be borne by the Borrower; 

            


      	 	 


    

    
      	2.	
              Penalty
                Interest:

              The
                Borrower agrees to pay the loan principal, interest and costs due
                on time
                in accordance with the provisions under this contract. In case the
                Borrower fails to repay on time and/or fails to pay off all arrears
                (including the loan principal, interest and sums of money and cost
                due) in
                accordance with the provisions hereunder, the arrear in question
                is
                considered overdue. Since the day the arrear is overdue, all arrears
                the
                Borrower owes the Borrower become due ahead of schedule
                automatically, i.e. the amount overdue is the balance due of the
                Borrower.
                The
                Lender is entitled to collect penalty interest starting from the
                date the
                arrear becomes overdue according to relevant regulations of the People's
                Bank of China. The
                penalty interest will be an increase of 50% on the basis of the original
                interest rate
                set under the loan contract. The penalty interests shall be calculated
                from the date the arrear becomes overdue to the day when the balance
                due
                is paid off; if the Borrower fails to use the loan in accordance
                with the
                intended use provided herein, the penalty interest rate shall be
                an
                increase of 100% on the basis of the original
                interest rate of the loan set herein; for interest not paid on time,
                compound interest
                shall be applied by collecting penalty interest. The interest is
                paid off
                with the principal when the last installment of repayment is made.
                

            


    

     

    
      
        
        

      

      
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      	3.	
              Expenses
                from pressing for payment:

              In
                case the Borrower fails to pay off all arrears (including the loan
                principal, interest and all costs and expenses due) in accordance
                with the
                contract, which causes the Lender to resort to any means or methods
                for
                payment, all the expenses incurred from (such as the handling charges
                for
                the collateral, management fees, insurance premium, taxes, attorney
                fees
                and legal expenses, etc) shall be borne by the Borrower. Penalty
                interest
                rate of all of the expenses shall be collected according to the
                stipulations under this contract from the date of actual payment
                till the
                date of repayment of the sum of money. 

            


      	 	 


    

    
      	4.	
              Authorized
                Deduction:

              All
                the above charges shall be paid by the Borrower on time. The Borrower
                hereby irrevocably
                authorizes the Lender to withdraw the sum of money from the Borrower’s
                accounts to pay the above costs, if overdraft of relevant accounts
                occurs,
                the Borrower guarantees to repay the overdraft and the interest incurred
                promptly. 

            


    

    
 

    IV.
      Insurance 

     

    
      	1.	
              The
                Lender is entitled to request the Borrower to purchase insurance
                satisfactory to the Lender; upon the request, the Borrower shall,
                within
                the stipulated period, purchase the designated types of insurance
                from the
                insurance companies recognized by the Lender. Before paying off the
                loan
                principal and interest, the Borrower shall not discontinue the insurance
                for any reasons; otherwise, the Lender is entitled to act on the
                Borrower’s behalf to purchase the insurance and/or pay the insurance
                premium, all the costs shall be paid and/or discharged by the Borrower.
                However, despite this provision, the
                Lender is not obligated to purchase the insurance and pay the insurance
                premium for
                the Borrower; 

            


    

    
    

     

    
      
        
        

      

      
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      	2.	
              The
                Lender is entitled to become the beneficiary of the insurance policy
                and
                keep the text of the insurance policy; if the Borrower is the beneficiary
                of the insurance policy,
                the Borrower shall authorize the Lender to be its representative
                to
                receive insurance compensation
                and irrevocably authorize the Lender to be the holder of the compensation.
                This
                authorization is irrevocable without written consent of the Lender;
                

            


      	 	 


    

    
      	3.	
              If
                the above amount of insurance compensation is insufficient to compensate
                for the Borrower’s arrears, the Lender is entitled to recover the arrears
                from the Borrower till the Borrower pays off all arrears;
                

            


      	 	 


    

    
      	4.	
              If
                the Borrow believes the purchased insurance is insufficient in amount
                or
                variety, separate purchase of insurance shall be made.
                

            


    

    
 

    V.
      Preconditions for the Loan

     

    
      	1.	
              The
                Borrower has submitted valid business license, articles of association,
                contract and resolution of board meeting and other documents requested
                by
                the Lender; 

            


      	 	 


    

    
      	2.	
              This
                contract is signed and sealed by the legal representatives or authorized
                agents of the Lender and the Borrower and notarized by relevant notary
                office; 

            


      	 	 


    

    
      	3.	
              The
                Borrower and the Guarantor Mr. Li Tianfu have obtained valid loan
                cards,
                and
                no major negative information is shown in the business credit system
                established by
                the People's Bank of China; 

            


      	 	 


    

    
      	4.	
              The
                Guarantor Mr. Li Tianfu has signed “Guarantee Contract” with the Lender,
                which has been notarized by notary office;


            


      	 	 


    

    
      	5.	
              The
                Guarantor NIVS International (Hong Kong) Limited has signed the DEED
                OF
                GUARANTEE, which deed has been received by the Lender;
                

            


    

     

    
      
        
        

      

      
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      	6.	
              The
                Borrower has concluded “contract
                of land-use right mortgage”
                with
                the Lender regarding collateral I, which has been notarized by the
                notary
                office. The mortgage registration formalities shall be gone through
                within
                75 days from
                the day of the first withdrawal by the Borrower and the certificate
                of
                land use right for the land to be put in pledge and the mortgage
                registration documents have been received by the Lender (applicable
                to the
                withdrawal of loan of the second phase); 

            


      	 	 


    

    
      	7.	
              The
                Borrower has signed “Mortgage Contract of Machinery Equipment” regarding
                collateral II, which has been notarized by notary office. Mortgage
                registration formalities shall be completed with the local Administration
                of Industry and Commerce in the place where the collaterals are located,
                and relevant mortgage registration documents have been handed over
                to the
                Lender; 

            


      	 	 


    

    
      	8.	
              Collateral
                II has been covered by insurance upon request of the Lender. The
                insurance
                interest has been transferred to the Lender and the original insurance
                policy has been handed over to the Lender;


            


      	 	 


    

    
      	9.	
              The
                assessment company recognized by the Lender has issued a formal written
                assessment report of the collateral, and the Lender is satisfied
                with the
                assessment result; 

            


      	 	 


    

    
      	10.	
              The
                Borrower has paid off the fees and taxes stipulated under this contract;
                

            


      	 	 


    

    
      	11.	
              The
                Lender is satisfied with the documents submitted by the Borrower
                and the
                legal formalities, and upon request of the Lender, the Borrower shall
                issue a legal opinion via a law firm recognized by the Lender.
                

            


    

    
 

    VI.
      Statement and Warranty of the Borrower

     

    
      	1.	
              The
                Borrower is an effectively-existing enterprise established under
                the laws
                of the People's Republic of China and has the right to bear civil
                liabilities with the assets it owns (or the assets the State has
                authorized it to manage and operate), and has sufficient legal authority
                to borrow this loan in accordance with the terms of this contract
                and
                perform the responsibilities set for the under this contract; the
                Lender
                has obtained all necessary authorization from the company while signing
                and performing this contract, therefore, this contract is a document
                of
                responsibility that is legally binding to the borrower.
                

            


    

    
    

     

    
      
        
        

      

      
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      	2.	
              The
                information and all the documents that the Borrower submits to the
                Lender
                in relation to this contract shall be completely true and correct.
                

            


      	 	 


    

    
      	3.	
              “Special
                funds for special use” shall be guaranteed for the loan as stipulated
                under this contract; if the Lender requests, the Borrower shall provide
                relevant payment vouches, trade contracts, approval documents or
                other
                documents required by other lenders from time to time for review,
                and the
                amount of the loan is not applicable until they are verified.
                

            


      	 	 


    

    
      	4.	
              The
                Borrower hasn’t conducted any act in breach of this contract, nor are
                there any accidents that might lead to a breach of the contract.
                

            


      	 	 


    

    
      	5.	
              The
                conclusion,
                implementation and entry into force of this contract and the documents
                related to the collateral, and the Borrower's withdrawal of the loan
                or
                its performing of responsibilities under
                this contract will not violate the laws of the People's Republic
                of China,
                and all the approval, registration, documentation and other procedures
                required by the laws of the People's Republic of China have been
                completed.

            


      	 	 


    

    
      	6.	
              The
                Borrower shall be aware of the “Measures of Administration of Bank Credit
                Registration and Consulting Procedures (Trial Implementation)”
                (hereinafter referred to as “the Measures”) set forth by the People's Bank
                of China and attention shall be paid to relevant provisions
                subsequently-amended from time to time; during the renewal period
                of the
                loan, the Borrower shall save no effort to guarantee the effectiveness
                of
                the loan card; the Borrower agrees that the Lender may use different
                legal
                means [including
                but not limited to the system established by the People's Bank for
                that
                method (hereinafter referred to as “The System”)]
                to
                inquire into the credit conditions; if the loan card is cancelled
                or found
                invalid by the People's Bank of China, it will be deemed as a breach
                of
                the loan contract; Regardless of any impact on the borrower, so long
                as
                the records made by the Lender are true and/or non-malicious, the
                Borrower
                will give up the right to claim any economic loss and reputation
                loss
                incurred. 

            


    

    
    

     

    
      
        
        

      

      
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      	7.	
              Important
                statement: The Borrower hereby declares that neither the Borrower
                nor
                the
                Guarantor has any relation with the Lender and/or Bank of China (Hong
                Kong) Limited,
                and any person or any group defined in Article 83 (4) of “Banking
                Ordinance”. If the Borrower or the Guarantor gets into any relationship
                with
                such person and/or group in the future, the Borrower promises to
                give a
                written notice to the Lender as soon as possible.
                

            


    

    
 

    VII.
      Commitment of the Borrower

     

    
      	1.	
              To
                obey all provisions of this contract, repay the principal and pay
                the
                interest and other expenses due and payable, within the time limits
                specified
                by this contract.

            


      	 	 


    

    
      	2.	
              To
                maintain the corporate
                entity and the right to continue business operation, maintain the
                effectiveness and legality of this contract and all rights with respect
                to
                performance of this contract, and renew all certificates of approval,
                authorization and permission with respect to this contract on
                time.

            


      	 	 


    

    
      	3.	
              To
                notify the Lender immediately in writing in case of any lawsuit,
                arbitration and hearing going against the
                borrower.

            


      	 	 


    

    
      	4.	
              The
                Borrower shall commit itself to ensuring that the loan and its use
                under
                this contract comply with relevant laws of the people’s republic of China;
                in case the Borrower fails to use the loan as specified by this contract,
                the lender can stop granting the remaining part of loan and terminate
                this
                contract.

            


      	 	 


    

    
      	5.	
              The
                Borrower
                shall commit itself to ensuring that the financial statements will
                be
                provided to
                the Lender on a monthly basis within the term of the loan and the
                audited
                annual financial
                statements provided within 180 days of the ending date of a fiscal
                year.

            


      	 	 


    

    
      	6.	
              The
                Borrower shall commit itself to ensuring that, if a covered building
                is
                constructed on collateral
                I and the relevant ownership certificate is obtained, the
                Borrower shall offer as mortgage the said covered building to the
                Lender
                within 3 months of the date when the said ownership certificate is
                obtained.

            


      	 	 


    

    
      	7.	
              The
                Borrower shall commit itself to ensuring that the annual total amount
                of
                payments for goods collected via the account opened by the Borrower
                with
                the Lender shall be no less than equally to 0.2 billion RMB in value
                within the term of this loan.

            


    

     

    
      
        
        

      

      
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      	8.	
              Special
                commitment: The Borrower promise, declare and guarantee that it will
                obey
                the following terms and conditions of the loan: The Borrower shall
                not use
                the loan granted by the Loaner, in whole or in part, for supporting
                the
                Borrower or other individuals, directly or indirectly, to purchase
                or
                prepare to purchase any share
                of
                BOC Hong Kong (Holdings) Limited, or for reducing
                the liabilities of the Borrower or releasing the Borrower from the
                liabilities incurred from purchasing such shares. The Lender shall
                grant
                the loan to the Borrower under the preconditions of the foregoing
                commitments, declarations and guarantees.


            


      	 	 


    

    
      	9.	
              In
                case that the Borrower belongs to the scope of “group client” prescribed
                by the “Guidance on Risk Control of Credit Business for Group Clients of
                Commercial Bank Group” issued by China Banking Regulatory Commission -
                Order No. 5 of Year 2003, the Borrower shall report on the affiliated
                business accounting for 10% or above of the total net assets of the
                group,
                including:

            


      	 	 


    

    
      	
            	(1)	
              Affiliated
                relationships among all transacting
                parties;

            


      	 	 	 


    

    
      	
            	(2)	
              Items
                and natures of transactions;

            


      	 	 	 


    

    
      	
            	(3)	
              Amounts
                and percentages of transactions; 

            


      	 	 	 


    

    
      	
            	(4)	
              Pricing
                policies (including transactions with no amount or a token
                amount)

            


      	 	 	 


    

    
      	10.	
              In
                case that the Borrower belongs into the scope of “group client” prescribed
                by the “Guidance on Risk Control of Credit Business for Group Clients of
                Commercial Bank Group” issued by China Banking Regulatory Commission -
                Order No. 5 of Year 2003, the Lender shall have the right to, at
                the
                Lender’s own discretion, stop granting the remaining part of loan to the
                Borrower and recover the already-granted loan including principal
                and
                interest, in whole or in part, in case the Borrower falls into any
                one of
                the following cases:

            


      	 	 


    

    
      	
            	(1)	
              The
                Borrower provides false documents or conceals important operating
                or
                financial facts;

            


      	 	 	 


    

    
      	
            	(2)	
              The
                Borrower changes the prescribed use of the loan, impropriates the
                loan, or
                uses the loan for illegal or unlawful
                transactions;

            


    

     

    
      
        
        

      

      
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            	(3)	
              The
                Borrower comes to the bank for discount, hypothecation, fund or credit
                based on the false contracts between the Borrower and its affiliated
                parties or notes
                receivable and accounts receivable without real transaction
                backgrounds;

            


      	 	 	 


    

    
      	
            	(4)	
              The
                Borrower refuses to accept the Lender’s supervision and inspection on the
                use of the loan and the related operating and financial
                activities;

            


      	 	 	 


    

    
      	
            	(5)	
              The
                Borrower is involved in major merger, purchase or reorganization
                activities, and
                the Lender thinks such activities may influence the security of the
                loan;

            


      	 	 	 


    

    
      	
            	(6)	
              The
                Borrower deliberately evades financial claims of the bank by affiliated
                transactions.

            


    

    
 

    VIII.
      Breach of Contract

     

    
      	1.	
              Any
                of the following issues would constitute a breach of
                contract:

            


      	 	 


    

    
      	
            	(1)	
              The
                Borrower fails to pay back principal and interest on schedule or
                fails to
                pay other payable sum of money on schedule stipulated in the contract
                according to the requirement from the
                Lender;

            


      	 	 	 


    

    
      	
            	(2)	
              Breach
                of any articles in the contract by the
                Borrower;

            


      	 	 	 


    

    
      	
            	(3)	
              Any
                certificate, announcement, promise or signed contract by the Borrower
                under
                the Contract is proved as fake or incorrect;


            


      	 	 	 


    

    
      	
            	(4)	
              Any
                of the loan, deposit, compensation promise and other loan liabilities
                of
                the Borrower, warrantor and/or mortgager is required to be to pay
                off
                ahead of schedule or is not paid off on schedule due to breach against
                contract;

            


      	 	 	 


    

    
      	
            	(5)	
              Any
                of the approval from government, certificate, approval or authority
                which
                makes the contract executable or valid is withdrawn, withheld, seriously
                modified or expires;

            


      	 	 	 


    

    
      	
            	(6)	
              The
                Borrower, warrantor and/or mortgager change the shareholding structure
                without approval in written form from the
                Lender;

            


      	 	 	 


    

    
      	
            	(7)	
              The
                ability of the Borrower, warrantor and/or mortgager to execute the
                contract is seriously affected due to negative change in their business,
                operation prospects and property;

            


    

    
    

     

    
      
        
        

      

      
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            	(8)	
              The
                Borrower, warrantor and/or mortgager cannot pay off debt to general
                creditor
                or other banks; or cannot liquidate in bankrupt or stop
                operation.

            


      	 	 	 


    

    
      	
            	(9)	
              All
                or any key part of the property of the Borrower, warrantor and/or
                mortgager is
                confiscated,
                expropriated, mandatory purchased (no matter with price or not) or
                damaged;

            


      	 	 	 


    

    
      	
            	(10)	
              There
                is any order from court or government or any resolution that requires
                dissolution, liquidation and closure of all or part of the property
                of the
                Borrower, warrantor and/or mortgager, or that appoints receiver or
                trust
                or to dispose all or part of the property of the Borrower, warrantor
                and/or mortgager;

            


      	 	 	 


    

    
      	
            	(11)	
              The
                Borrower, warrantor and/or mortgager is threatened by attachment,
                garnishee order or prohibitory injunction which may result in negative
                impact upon the real estate or property, and such threat cannot be
                successfully removed within thirty days;

            


      	 	 	 


    

    
      	
            	(12)	
              Any
                approval, registration and/or record necessary for the guarantee
                documents
                listed in Appendix I to be effective cannot be obtained or lose its
                validity of due to any other reasons; 

            


      	 	 	 


    

    
      	
            	(13)	
              Loan
                card is cancelled or determined as invalid by the People’s Bank of
                China.

            


      	 	 	 


    

    
      	2.	
              In
                event that the Borrower finds that any of the issues mentioned above
                or
                anything that may result in breach of the contract has already happened,
                the Borrower shall inform the Lender in written form
                immediately;

            


      	 	 


    

    
      	3.	
              Unless
                all issues mentioned above have been solved in a way satisfactory
                to the
                Lender, the Lender has the right to ask the Borrower to pay back
                all of
                the loan and timely dispose the collateral to compensate for the
                loan
                under the contract any time after these issues
                happened;

            


      	 	 


    

    
      	4.	
              When
                any of the issues mentioned above happens, the Lender has the right
                to act
                on any right endowed to the Lender regarding the collateral under
                the
                contract and/or listed in Appendix I in accordance with relevant
                laws of
                the people’s republic of China.

            


    

     

    
      
        
        

      

      
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    IX.
      Other

     

    
      	1.	
              In
                the absence of agreements other than this contract, revising, renouncing
                or terminating any clause related to this contract requires the agreement
                of the lender in advance.

            


      	 	 


    

    
      	2.	
              During
                execution of this contract, any lenience, postponement, tolerance,
                or
                giving of additional deadlines to the borrower does not damage, influence
                or limit any of the rights or power of the lender stipulated in this
                contract. Such actions do not waive the lender's rights regarding
                any
                violation of the contract, and cannot be regarded as the basis for
                abandoning the lender's right to take action in the case of future
                contract violation. 

            


      	 	 


    

    
      	3.	
              If
                the borrower does not carry out any clause in this contract, the
                lender
                can sell off other property saved with the lender in compensation
                for the
                debt without forewarning. If the borrower has other funds saved with
                the
                lender (including any expired/mature or immature deposits) the lender
                can
                also remit them in compensation for the
                debt.

            


      	 	 


    

    
      	4.	
              In
                the case that the borrower, guarantor, and/or mortgagor cannot pay
                back
                the debt on time, they agree to directly accept the enforcement of
                the
                people's court with jurisdiction in this
                case.

            


      	 	 


    

    
      	5.	
              In
                the absence of agreements other then this contract, the interest
                and
                penalties for each loan are calculated by
                day, with 360 days per year as a calculation
                basis.

            


      	 	 


    

    
      	6.	
              When
                the borrower repays their debt, the lender is only required to provide
                the
                debt figure
                form issued by the borrower (with exception of it containing obvious
                mistakes). This
                is the borrower's substantial proof of the debt, and the borrower
                may not
                raise objections.

            


      	 	 


    

    
      	7.	
              The
                rights and powers stipulated in this contract can be exercised
                simultaneously or separately, and can also be accumulated. The above
                rights, interests and compensation measures do not in any way eliminate
                other legally stipulated rights and compensation
                measures.

            


    

     

    
      
        
        

      

      
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      	8.	
              Notifications
                and requests related to this contract should be in written form.
                The
                moment a telex, telegraph, or any correspondence delivered by hand
                sent by
                the lender to the borrower is sent out it is seen as being delivered
                to
                the other party, and letters are seen as being delivered to the borrower
                seven days after they have been posted. The criteria for delivery
                of
                notifications and requests sent by the borrower to the lender are
                actual
                receipt by the lender.

            


      	 	 


    

    
      	9.	
              The
                lender can transfer possession of the lender's rights and interests
                in
                this contract without
                seeking permission from the borrower. If the borrower has not obtained
                permission from the lender, the borrower may not transfer any debt
                or any
                other responsibility or liability specified in this contract to a
                third
                party. In the case of transfer, the borrower's successor or continuation
                person must continue to bear the debt
                and other responsibilities in this contract to the lender or the
                lender's
                transferee. 

            


      	 	 


    

    
      	10.	
              References
                in this contract to the lender also apply to the lenders successor
                or
                transferee. References in this contract to the borrower also apply
                to the
                borrower's successors or continuation persons who have been accepted
                by
                the lender.

            


      	 	 


    

    
      	11.	
              If
                for whatever reason this contract is legally voided or if certain
                clauses
                become legally voided, the borrower should continue to carry out
                all
                responsibilities regarding
                paying off the debt. In the event of the occurrence of the above
                situation, the
                lender has the right to terminate the contract and immediately demand
                repayment of the borrower's principal and interest and other related
                funds.

            


      	 	 


    

    
      	12.	
              Nanyang
                Commercial Bank is a Limited Responsibility Company registered and
                established
                in Hong Kong. Registration address is 151
                DES VOEUX RD, CENTRAL, HONG
                KONG.
                This company has established a branch in Guangzhou city, and the
                business
                name used is Nanyang Commercial Bank Ltd. Co., Guangzhou Branch.
                The
                business address is ROOM
                402, SKYGALLERIA, CITIC PLAZA, 233 TIAN HE NORTH ROAD, GUANGZHOU,
                CHINA

            


    

     

    
      
        
        

      

      
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    X.
      Applicable Laws and Dispute Resolution

     

    
      	1.	
              This
                contract is concluded according to the laws of the People's Republic
                of
                China, and receives the guarantee of the People's Republic of
                China.

            


      	 	 


    

    
      	2.	
              The
                Chinese court of law has the right to hear any lawsuit related to
                this
                contract, and only the lender has the right to transfer this or other
                lawsuits to other courts of law.

            


      	 	 


    

    
      	3.	
              During
                dispute resolution, with the exception of the disputed items, both
                parties
                should continue to carry out the other clauses stipulated in this
                contract.

            


    

    
 

    XI.
      Supplementary Articles

     

    
      	1.	
              This
                contract requires the signature and official seal of the legal
                representatives of both parties (the lender and the borrower) or
                their
                legally authorized representatives, as well as notarization by the
                notary
                office. 

            


      	 	 


    

    
      	2.	
              Before
                the expiry date of the loan term, if the application of the borrower
                is
                agreed to
                by the lender, it is possible to conduct a loan term time limit extension
                procedure.

            


      	 	 


    

    
      	3.	
              All
                business days referred to in this contract are those days that the
                lender
                and its head office are open to the public for
                business.

            


      	 	 


    

    
      	4.	
              The
                date the notarization of this contract is settled is regarded as
                the
                effective date of the contract. The loan due date is regarded as
                this
                contract's expiry date. The termination of this contract has the
                precondition that the borrower paid off all the arrearage under the
                contract.

            


      	 	 


    

    
      	5.	
              This
                contract is written in Chinese in sextuplicate and each copy has
                equal
                effect. Lender
                has two (2) copies; borrower has one (1) copy; notary office files
                one (1)
                copy; National
                Land Resources and Housing Management Department files
                one (1) copy for mortgage transaction registration Procedure; Commercial
                Administration Department files one (1) copy for mortgage transaction
                registration Procedure.

            


    

    


    
      
        
        

      

      
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    XII.
      Brief

     

    
      	1.	
              Lender
                has already assured that the borrower has a complete and accurate
                understanding of
                all clauses in this contract and responded to all requests (if any)
                of the
                borrower. Signing of the contract indicates agreement by both parties
                to
                each and every clause in the
                contract.

            


    

     

    (No
      text
      below on this page)

    


    


    
      
        
          
          

        

        
          Page
            18
            of 23

          
            

          

        

        
          
          

        

      

    

    


    Each
      party has carefully read this contract and appendix, and agrees to respect
      all
      clauses of this contract. The signature and seal below verify this.

    


    Borrower:
      NIVS Audio & Video Technology CO., LTD

    (Seal)
      (Signature)

    
      
        /s/
          Tianfu Li      

      

    

    Date:       Location:
      Huizhou

    


    Lender:
      Nanyang Commercial Bank Co. Ltd., Guangzhou Branch

    


    Authorized
      Signature and Seal: Seal and Signature

    


    


    
      
        
        

      

      
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          19
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    Appendix
      I: Collateral
      list

    


    (1)
      Collateral
      I

    


    Owner:
      NIVS Audio & Video Technology CO., LTD

    


    
      
        	1.	
                "State-owned
                  Land Use Certificate" Serial Number: Huizhou Government National
                  Use
                  (2005) #13021700261

                Land
                  location: Huizhou City, Shuikou Country, Lianhe Ridge Wei
                  Village

                Right
                  of use surface area: 13,836.3 square meters

                Purpose:
                  Industrial use

              


        	 	 


      

    

    
      	
              2.

            	
              "State-owned
                Land Use Certificate" Serial Number: Huizhou Government National
                Use
                (2005) #13021700263

              Land
                location: Huizhou City, Shuikou Country, Lianhe Ridge Wei
                Village

              Right
                of use surface area: 7,740.7 square meters

              Purpose:
                Industrial use

            


      	 	 


    

    
      	3.	
              "State-owned
                Land Use Certificate" Serial Number: Huizhou Government National
                Use
                (2005) #13021700267

              [illegible]

               

              Purpose:
                Industrial use

            


    

    


    The
      right
      to use the land in the above mortgage comes from the evaluation of Guangdong
      Zheng Sen Asset Evaluation and Real Estate Evaluation Co. Ltd. The date of
      the
      evaluation was May 30, 2007. The net worth was evaluated to be nine million,
      five hundred and seventy seven thousand RMB (RMB 9,577,000). [For details see
      the report of Guangdong Zheng Sen Asset Evaluation and Real Estate Evaluation
      Co. Ltd. [Report Serial Number: Guangdong Forestry ping zi (2007)
      #0061]

     

    
      
        
        

      

      
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          20
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      	(2)	
              Collateral
                II

            


    

    


    
      	1.	
              The
                machinery facilities in the above mortgage were evaluated by Guangdong
                Zheng Sen Asset Evaluation and Real Estate Evaluation Co. Ltd. The
                date of
                the evaluation was May 30, 2007. The net worth was evaluated to be
                eighteen million, seven thousand nine hundred RMB (RMB 18,007,900).
                [For
                details see the report of Guangdong Zheng Sen Asset Evaluation and
                Real
                Estate Evaluation Co. Ltd. [Report Serial Number: Guangdong Forestry
                ping
                zi (2007) #0068]

            


      	 	 


    

    
      	2.	
              Attached:
                From Guangdong Zheng Sen Asset Evaluation and Real Estate Evaluation
                Co.
                Ltd. (Report Serial Number: Guangdong Forestry ping zi (2007)
                #0068) "Fixed assets machinery
                facilities detailed evaluation
                form."

            


    

     

     

    
      
        
        

      

      
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    Appendix
      II

    Withdrawal
      Application

    Date:
      Year/Month/Day

    


    For:
      Nanyang Commercial Bank Co. Ltd., Guangzhou Branch

    


    According
      to the related stipulations in the "Loan Contract" (Serial Number:
      0434602007027C000000), now submit the withdrawal application of hypothecated
      Loans on time as below:

    
      	
            	1.	
              Application
                withdrawal amount:

            


    

    
      
        	
              	2.	
                Withdrawal
                  date: ____________or, date esteemed firm approves withdrawal:
                  _____________If esteemed firm approves withdrawal, please save
                  it directly
                  into the account esteemed firm created for this company. Account
                  number:
                  ______________.

              


      

    

    


    This
      company confirms that on the day this "Withdrawal Application" is sent out:
      (1)
      the prerequisite conditions of each item in "Loan Contract" have already been
      settled and are being carried out, and in addition that each statement, pledge
      and commitment continue to be in effect; (2) there has been no occurrence of
      violation of the "Loan Contract."

    

      
        	
                This
                  company promises: 

              	
                (1)
                  the above loan will be used for:___________________

              
	 	
                (2)
                  the responsibilities regarding repayment of principal
                  and interest will be carried out according to the text of the "Loan
                  Contract." 

              
	 	 
	 	
                    Borrower:
                  NIVS
                  Audio & Video Technology CO., LTD

              
	 	 
	 	
                            Signature
                  and
                  Seal:

              


      

    

     

    
      
        
        

      

      
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          22
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    Below
      for
      use by bank only

    
      	
              Serial
                Number

            	
              Loan
                Term

            	
              Quota-specified
                expiry Date

            	
              Usable
                Quota

            	
              Approved
                Loan 

            
	 	 	 	 	 


    

    


    Hand
      over
      person:                     Check
      person:                     director:

    


    


    
      
        
        

      

      
        Page
          23
          of 23

        
          

        

      

      
        
        

      

    

    


    Notarized
      Document

    


    (2007)
      Guangzhou Certificate Internal jing zi # 112697

    


    Applicant:

    Borrower:
      NIVS
      Audio
& Video Technology CO., LTD. 

    Business
      License Number:

    Qi
      He Yue
      Zong Fu Zi #005100.    Location:
      Huizhou City.

    Legal
      Representative: Li Tianfu

    Lender:
      Nanyang Commercial Bank Co. Ltd., Guangzhou Branch. 

    Business
      License Registration Number: Qi Wai Yue Yin Fu Zi # 00432. 

    Location:
      Guangzhou City.

    Responsible
      person: Song Wei-guang. Title: Bank President

    Proxy
      agent: Li Rongquan

    Notarized
      Item: Loan contract and enforceable effects.

    Both
      parties have applied for notarization from this department for the "Loan
      Contract" with the serial number: 0434602007027C000000.

    After
      undergoing investigation, both parties engage in consultation and reached
      agreement on the above "Loan Contract." When both parties sign the contract
      into
      effect they both have legally stipulated civil rights and civil behavior
      abilities, and the proxy has the appropriate proxy rights.

    The
      concerned individuals from both parties concluded and signed the "Loan Contract"
      with real intent, and both parties agreed in the contract that the borrower
      will
      borrow money from the lender, and the borrower will pay off the debt in the
      manner specified in the contract. The contents of the contract are clear,
      specific, and there is no confusion on the part of either party regarding the
      contract. The guarantees in the contract are in accordance with the relevant
      laws.

    On
      the
      basis of the above facts, this certifies that the legal representative of the
      NIVS Audio & Video Technology CO., LTD, Li Tianfu, and the agents of Nanyang
      Commercial Bank Co. Ltd., Guangzhou Branch, Song Wei-guan and Li Rongquan,
      have
      concluded and signed the above "Loan Contract" on this date July 4th,
      2007.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      conduct of the concerned individuals in signing was in accordance with the
      regulations of the 55th
      clause
      of the "People's Republic of China Civil Law General Rule." The contract
      contents are in accordance with the regulations of the "People's Republic of
      China Contract Law" and the "People's Republic of China Guarantee Law," and
      the
      signature and seal of the concerned parties verify this to be true.

    According
      to the relevant regulations from " People's Republic of China Civil Procedural
      Law", " People's Republic of China Notarization
      Law" and "Joint Notice of Supreme People's Court and Ministry of Justice on
      the
      enforcement of documents with Notary Authority evidencing the creditor’s rights
      and entitling to its compulsory execution," beginning from the date this
      notarized document is issued, this notarized document has enforceable
      effect.

    


    


    


    


    


    
      	 	
              People's
                Republic of China, Guangdong 

            
	 	
                      Provincial
                Notary Office

            
	 	 
	 	
              Notary
                Officer:  /s/ Qu
                Yibang

            
	 	
                         (Seal)

            
	 	 
	 	
              July
                17th,
                2007