NOTE 10 - LINE OF CREDIT, SHORT TERM DEBT AND BANK ACCEPTANCE NOTES

Line of credit

In 2011, we were approved for a line of credit up to an aggregate of $6.2 million from the Taizhou Branch of China Merchants Bank through our majority-owned subsidiary, Jonway. Although we have been approved for the credit line, there are no legal obligations or rights to the credit line until we execute agreements with the lender to borrow funds under the credit line. When drawn down, the credit line will be secured by lands owned by Jonway and guaranteed by Jonway Group.

In May 2012, we were approved up to an aggregate of $ 7.1 million of bank facility from the Sanmen Branch of CITIC Bank ("CITIC") through Jonway. Although we have been approved for the credit line, there are no legal obligations or rights to the credit line until we execute agreements with the lender to borrow funds under the credit line. When drawn down, the credit line will be secured by land and buildings on this land owned by Jonway and guaranteed by Jonway Group.

Under the above mentioned credit line of $6.2 million granted by CMB on August 19, 2011, Jonway entered into a Credit Agreement with CMB for a revolving short term bank loan in the aggregate amount of approximately US$3.2 million which was drawn down in 2011. The annual interest rate is 7.22% and was due on August 18, 2012. The loan is secured by a Maximum Amount Mortgage Contract by and between Jonway and CMB dated August 11, 2011 in which land use rights over two parcels of land owned by Jonway at Sanmen Factory have been pledged as security for this loan. As of September 30, 2012, the Company had repaid $3.2 million.

Under the above mentioned credit line of $7.1 million granted by CITIC, Jonway entered into a Credit Agreement with CITIC for a revolving short term bank loan in the aggregate amount of approximately US$ 1.6 million which was drawn down on May 25, 2012. The annual interest rate is 8.33% and is due on December 28, 2012. The loan is secured by a Maximum Amount Mortgage Contract by and between Jonway and CITIC dated May 25, 2012 in which land use right over one parcels of land and the buildings on this land owned by Jonway at Sanmen Factory have been pledged as security for this loan. The remaining $5.6 million of the credit line was executed through the issuance of bank acceptance notes by CITIC to Jonway suppliers for the due payables.

In December 2011, Jonway established additional short term bank loans amounting to over $2.22 million from three small-size banks based in Taizhou City, which are subject to Jonway Group guarantee, of which $790 of such loans were secured by bank notes received from Jonway dealers. These loans were repaid on March 31, 2012.

On March 31, 2012, to support the monthly business performance target of Taizhou Branch of China Merchants Bank, Jonway entered into another credit agreement with this bank for a sum of short term bank loan in the aggregate amount of approximately $520 which was drawn down on March 31, 2012, and repaid on April 1, 2012.

During the quarter ended June 30, 2012, Jonway entered into additional short term loan agreements with both banks based in Taizhou city for the aggregating amount of approximately $1 million. Such bank loans are secured by Jonway Group.

As of September 30, 2012, Jonway had approximately $2.6 million in short term bank loans outstanding which are borrowed from the above stated China-based banks with interest rates ranging from 8.33% to 9% per annum and are due within December 2012.

	September 30, 2012		December 31, 2011
Loan from China Merchant Bank	$	-	$	3,174
Loan from Taizhou Bank		633		1,428
Loan from Zhejiang Tailong Commercial Bank		316		794
Loan from CITIC Bank		1,583		-
Short term financing insurance premiums		80		89
Total	$	2,612	$	5,485

On December 6, 2011, Jonway entered into a bank acceptance note Agreement with Taizhou Branch of China Everbright Bank for a revolving bank note facility in the aggregate amount of approximately US$3.17 million. Such bank note facility were issued to Jonway Auto's suppliers under the Credit Agreement and are secured by a Maximum Amount Mortgage Contract by and between Jonway and this bank dated December 6, 2011 in which land use right over one parcel of land owned by Jonway at Sanmen Factory has been pledged as security for this facility. Except for the bank acceptance notes payable to China Everbright Bank, other bank acceptance notes payable to other banks were granted through the below mentioned cash deposit practice.

As of September 30, 2012, the Company has bank acceptance notes payable in the amount of $29.97million. The notes are guaranteed to be paid by the banks and usually for a short-term period of six (6) months. The Company is required to maintain cash deposits at a minimum 40%-60% of the notes payable with these banks, in order to ensure future credit availability. As of September 30, 2012, the restricted cash for the notes was $15.1 million.

Bank acceptance notes- 6 month term for each note issued

	September 30, 2012		December 31, 2011
a)Bank acceptance notes payable to Taizhou Bank	$	5,064	$	2,451
b)Bank acceptance notes payable to China Merchant Bank		4,241		3,316
c)Bank acceptance notes payable to China Everbright Bank		6,325		4,761
d)Bank acceptance notes payable to Zhejiang Tailong Commercial Bank		475		-
e)Bank acceptance notes payable to Zhejiang Sanmen Yin Zuo Village Bank		1,266		-
f)Bank acceptance Notes payable to Shanghai Pudong Development Bank		676		-
g) Bank acceptance Notes payable to CITIC Bank		11,929		-
	$	29,976	$	10,528

On December 11, 2011, Zhejiang Jonway Automobile Co., Ltd. ("Jonway"), a majority owned subsidiary of ZAP, entered into a Promissory Note with Jonway Group Co. Ltd. ("Jonway Group") pursuant to which Jonway borrowed $3 million to be repaid on demand. The unpaid principal amount of the note bears interest at a rate per annum equal to 8%, calculated on the basis of a 365 day year and the actual number of days lapsed. All unpaid principal, together with any then unpaid and accrued interest is due and payable within ten (10) calendar days following demand by Jonway Group. Payment shall be made in the form of cash. As of December 31, 2011, a total of $1.6 million had been advanced to Jonway Automobile under the Promissory note arrangement and such borrowing was repaid in January 2012.