Placement
      Agent Agreement

    June
      19,
      2008        

    


    William
      Blair & Company, L.L.C.

    222
      West
      Adams Street

    Chicago,
      Illinois 60606

    


    ROTH
      Capital Partners, LLC

    24
      Corporate Plaza

    Newport
      Beach, CA 92660

    


    Ladies
      and Gentlemen:

    


    Section
      1. Appointment
      of Placement Agents.
      This
      Placement Agent Agreement (this “Agreement”) confirms our understanding that
      Harbin Electric, Inc., a Nevada corporation (the “Company”), hereby appoints
      William Blair & Company, L.L.C. and ROTH Capital Partners, LLC pursuant to
      the terms of this Agreement as its exclusive placement agents (the “Placement
      Agents”) in connection with the proposed direct placement (the “Placement”) to
      certain investors of up to three million five hundred thousand (3,500,000)
      shares (the “Shares”) of the Company’s common stock, par value $0.00001 per
      share (the “Common Stock”). On the basis of the representations and warranties
      contained herein and subject to the terms and conditions set forth herein,
      the
      Placement Agents severally agree to use their respective commercially reasonable
      efforts to assist the Company in its solicitation, confirmation and receipt
      of
      offers to purchase the Shares. Such efforts under this Agreement shall include
      providing administrative services as reasonably requested by the Company in
      connection with confirming orders of purchases of shares, collecting payment
      for
      the shares and distributing the shares in the Placement, and assisting the
      Company with (i) evaluating the structure of the offering, (ii) negotiating
      the
      terms of the Placement, (iii) soliciting indications of interest from potential
      purchasers and (iv) allocating the shares in the Placement. Notwithstanding
      anything to the contrary contained in this Agreement, neither Placement Agent
      shall have any obligation to purchase any of the Shares or, other than as a
      result of such Placement Agent’s bad faith, wilful misconduct or gross
      negligence, any other liability to the Company if any prospective purchaser
      (each a “Purchaser”) fails to consummate a purchase of any of the Shares. In the
      event that any Purchaser fails to consummate a purchase of any of the Shares,
      the Placement Agents may use their respective commercially reasonable efforts
      to
      solicit orders from and confirm sales to other investors identified by the
      Company or the Placement Agents. 

     

    Section
      2. Compensation.
      In
      connection with the Placement and sale of the Shares
      by the
      Company, the Placement Agents will charge the Company a placement fee (the
      “Placement Fee”) payable in immediately available funds on the date of the
      consummation of the Placement and sale of Shares (the “Closing Date”). The
      Placement Fee shall be equal to six percent (6%) of the aggregate price at
      which
      the Shares are sold by the Company in the Placement. The Placement Agent
      expenses shall be paid out of the Placement Fee, and thereafter the net amount
      shall be paid 66.665% to William Blair & Company, L.L.C. and 33.335% to ROTH
      Capital Partners LLC. The
      parties acknowledge and agree that no fee shall be payable hereunder unless
      the
      sale of Shares is consummated.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    Section
      3. Representations
      and Warranties.
      The
      Company represents and warrants to the Placement Agents that: 

     

    (a) This
      Agreement has been duly authorized, executed and delivered by the
      Company;

     

    (b) The
      making and performance by the Company of this Agreement (i) will not violate
      any
      provision of the Company’s charter or bylaws and (ii) will not result in the
      breach, or be in contravention, of any provision of any agreement, franchise,
      license, indenture, mortgage, deed of trust, or other instrument to which the
      Company or any subsidiary is a party or by which the Company, any subsidiary
      or
      the property of any of them may be bound or affected, or any order, rule or
      regulation applicable to the Company or any subsidiary of any court or
      regulatory body, administrative agency or other governmental body having
      jurisdiction over the Company or any subsidiary or any of their respective
      properties, or any order of any court or governmental agency or authority
      entered in any proceeding to which the Company or any subsidiary was or is
      now a
      party or by which it is bound, except in the case of clause (ii) to the extent
      such breach or contravention would not have a material adverse effect on the
      Company. 

     

    (c) No
      consent, approval, authorization or other order of any court, regulatory body,
      administrative agency or other governmental body is required for the execution
      and delivery of this Agreement or the consummation of the transactions
      contemplated herein, except for compliance with the Securities Act of 1933,
      as
      amended (the “1933 Act”), and blue sky laws applicable to the sale of the
      Shares. 

     

    Section
      4. Agreements.
       

     

    (a) The
      Company agrees with the Placement Agents that, during the term of this
      Agreement, if any event occurs or condition exists as a result of which the
      Company's filings with the Securities and Exchange Commission since January
      1,
      2008 (the "SEC Filings") would include an untrue statement of a material fact,
      or omit to state any material fact necessary to make the statements therein,
      in
      the light of the circumstances under which they were made, not misleading,
      the
      Company will promptly notify the Placement Agents of any such event, condition
      or opinion of counsel to the Company and shall prepare an amendment or
      supplement to any such filing that will correct such statement or omission
      or
      effect such compliance.

     

    (b) Each
      of
      the parties hereto hereby agrees that it will comply with all laws, rules and
      regulations applicable to it in conducting the Placement and carrying out its
      obligations under this Agreement.

     

    Section
      5. Closing
      Documents.
      On the
      Closing Date, the Company shall deliver to the Placement Agents:



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    (a) a
      certificate of the chief executive officer and the principal financial officer
      of the Company, dated as of the Closing Date, to the effect that the
      representations and warranties of the Company set forth in this Agreement are
      true and correct as of the date of this Agreement and as of the Closing Date,
      and the Company has complied with all the agreements and satisfied all the
      conditions on its part to be performed or satisfied at or prior to the Closing
      Date;

     

    (b) copies
      of
      any other documents delivered to the Purchasers in connection with the sale
      of
      the Shares; and

     

    (c) such
      further certificates and documents as the Placement Agents may reasonably
      request.

     

    Section
      6. Exclusive
      Appointment.
      The
      Company shall not, directly or indirectly, sell or offer to sell any of the
      Shares or any substantially similar equity security from the date hereof through
      the Closing Date. Any sale or disposition of such Shares or any substantially
      similar equity security by the Company during that period will be deemed to
      be
      as if such sale or disposition were undertaken by the Placement Agents directly
      for purposes of calculating the compensation due hereunder.

     

    Section
      7. Indemnity
      and Contribution. 

     

    (a) The
      Company agrees to indemnify and hold harmless each Placement Agent and each
      person, if any, who controls either Placement Agent within the meaning of the
      1933 Act or the Exchange Act against any losses, claims, damages or liabilities,
      joint or several, to which such Placement Agent or such controlling person
      may
      become subject under federal or state statutory law or regulation, at common
      law
      or otherwise (including in settlement of any litigation if such settlement
      is
      effected with the written consent of the Company), insofar as such losses,
      claims, damages or liabilities (or actions in respect thereof) (i) arise out
      of
      or are based upon any untrue statement or alleged untrue statement of any
      material fact contained in any SEC Filing, or any amendment or supplement
      thereto, or arise out of or are based upon the omission or alleged omission
      to
      state therein a material fact required to be stated therein or necessary to
      make
      the statements therein not misleading or (ii) arise in any manner out of or
      are
      based upon any claims relating to the Placement (other than losses, claims,
      damages or liabilities that result from such Placement Agent’s bad faith, wilful
      misconduct or gross negligence); and will reimburse each Placement Agent and
      each such controlling person for any legal or other expenses reasonably incurred
      by such Placement Agent or such controlling person in connection with
      investigating or defending any such loss, claim, damage, liability or action.
      In
      addition to its other obligations under this Section 7(a), the Company agrees
      that, as an interim measure during the pendency of any claim, action,
      investigation, inquiry or other proceeding subject to indemnification pursuant
      to this Section 7(a), upon receipt of notices setting forth in reasonable detail
      the matter for which indemnification is sought, it will reimburse the Placement
      Agents on a monthly basis for all reasonable legal and other expenses incurred
      in connection with investigating or defending any such claim, action,
      investigation, inquiry or other proceeding, notwithstanding the absence of
      a
      judicial determination as to the propriety and enforceability of the Company’s
      obligation to reimburse the Placement Agents for such expenses and the
      possibility that such payments might later be held to have been improper by
      a
      court of competent jurisdiction. This indemnity agreement will be in addition
      to
      any liability which the Company may otherwise have. 


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    (b) Promptly
      after receipt by an indemnified party under this Section 7 of notice of the
      commencement of any action, such indemnified party will, if a claim in respect
      thereof is to be made against the Company under this Section 7, notify the
      Company of the commencement thereof; but the omission so to notify the Company
      will not relieve it from any liability which it may have to any indemnified
      party except to the extent that the Company was prejudiced by such failure
      to
      notify. In case any such action is brought against any indemnified party, and
      it
      notifies the Company of the commencement thereof, the Company will be entitled
      to participate in, and, to the extent that it may wish, to assume the defense
      thereof, with counsel satisfactory to such indemnified party; provided, however,
      if the defendants in any such action include both the indemnified party and
      the
      Company and the indemnified party shall have reasonably concluded, based on
      advice of counsel, that there may be legal defenses available to it and/or
      other
      indemnified parties which are different from or additional to those available
      to
      the Company, or the indemnified parties and the Company may have conflicting
      interests which would make it inappropriate for the same counsel to represent
      both of them, the indemnified party or parties shall have the right to select
      separate counsel to assume such legal defense and otherwise to participate
      in
      the defense of such action on behalf of such indemnified party or parties.
      Upon
      receipt of notice from the Company to such indemnified party of its election
      so
      to assume the defense of such action and approval by the indemnified party
      of
      counsel, the Company will not be liable to such indemnified party under this
      Section 7 for any legal or other expenses subsequently incurred by such
      indemnified party in connection with the defense thereof unless (i) the
      indemnified party shall have employed such counsel in connection with the
      assumption of legal defense in accordance with the proviso to the immediately
      preceding sentence (it being understood, however, that the Company shall not
      be
      liable for the expenses of more than one separate counsel representing all
      indemnified parties not having different or additional defenses or potential
      conflicting interest among themselves who are parties to such action), (ii)
      the
      Company shall not have employed counsel satisfactory to the indemnified party
      to
      represent the indemnified party within a reasonable time after notice of
      commencement of the action or (iii) the Company has authorized in writing the
      employment of counsel for the indemnified party at the expense of the Company.
      The Company shall not, without the prior written consent of the indemnified
      party, effect any settlement of any pending or threatened proceeding in respect
      of which any indemnified party is or could have been a party and indemnity
      could
      have been sought hereunder by such indemnified party, unless such settlement
      includes an unconditional release of such indemnified party from all liability
      arising out of such proceeding.

     

    (c) If
      the
      indemnification provided for in this Section 7 is unavailable to an indemnified
      party under paragraph (a) in respect of any losses, claims, damages or
      liabilities referred to therein, then the Company, in lieu of indemnifying
      such
      indemnified party, shall contribute to the amount paid or payable by such
      indemnified party as a result of such losses, claims, damages or liabilities
      (i)
      in such proportion as is appropriate to reflect the relative benefits received
      by the Company and the Placement Agents from the Placement or (ii) if the
      allocation provided by clause (i) above is not permitted by applicable law,
      in
      such proportion as is appropriate to reflect not only the relative benefits
      referred to in clause (i) above but also the relative fault of the Company
      and
      the Placement Agents, as well as any other relevant equitable considerations.
      The respective relative benefits received by the Company and the Placement
      Agents shall be deemed to be in the same proportion, in the case of the Company,
      as the net proceeds to be received by the Company in the Placement (after
      deducting the Placement Fee but before deducting expenses) bears to, and in
      the
      case of the Placement Agents, as the Placement Fee received by them bears to,
      the total of such amounts paid by Purchasers in the Placement. The relative
      fault of the Company and the Placement Agents shall be determined by reference
      to, among other things, (i) in the case of any untrue or alleged untrue
      statement of a material fact or omission or alleged omission to state a material
      fact, whether the untrue or alleged untrue statement of a material fact or
      the
      omission to state a material fact relates to information supplied by the Company
      and the parties’ relative intent, knowledge, access to information and
      opportunity to correct or prevent such statement or omission, and (ii) in the
      case of any other action or omission, whether such action or omission was taken
      or omitted to be taken by the Company or by the Placement Agents and the
      parties’ relative intent, knowledge, access to information and opportunity to
      correct or prevent such action or omission. The amount paid or payable by a
      party as a result of the losses, claims, damages and liabilities referred to
      above shall be deemed to include any legal or other fees or expenses reasonably
      incurred by such party in connection with investigating or defending any action
      or claim.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    The
      Company and the Placement Agents agree that it would not be just and equitable
      if contribution pursuant to this Section 7(c) were determined by pro rata
      allocation or by any other method of allocation which does not take account
      of
      the equitable considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 7(c), neither Placement Agent
      shall be required to contribute any amount in excess of the amount by which
      the
      Placement Fee actually received by it exceeds the amount of any damages that
      such Placement Agent has otherwise been required to pay. No person guilty of
      fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
      Act) shall be entitled to contribution from any person who was not guilty of
      such fraudulent misrepresentation. The Placement Agents’ obligations to
      contribute pursuant to this Section 7(c) are several in proportion to the
      respective Placement Fees to be paid to them hereunder.

     

    Section
      8. Miscellaneous

     

    (a) Representations,
      Indemnity and Agreements to Survive.
      The
      respective representations, warranties and indemnities set forth herein will
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of the Placement Agents or the Company or any of their respective
      officers, directors or controlling persons, and will survive delivery of any
      payment for the Shares. The provisions of this Section and Sections 2, 3 and
      7
      hereof shall survive the termination or cancellation of this
      Agreement.

     

    (b) 
      Governing Law.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of Illinois.

     

    (c) Counterparts;
      Headings.
      This
      Agreement may be signed in counterparts with the same effect as if the
      signatures thereto were on the same instrument. The headings of the Sections
      of
      this Agreement have been inserted for convenience of reference only and shall
      not be deemed a part of this Agreement.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    (d) No
      Third Party Beneficiaries. This
      Agreement has been and is made solely for the benefit of the parties hereto,
      the
      indemnified persons and their respective successors and assigns, and nothing
      in
      this Agreement, expressed or implied, is intended to confer or does confer
      on
      any other person or entity any rights or remedies under or by reason of this
      Agreement or the covenants of the parties contained herein.

     

    (e) No
      Fiduciary Relationship. It
      is
      understood and agreed that the Placement Agents will act under this Agreement
      as
      independent contractors and nothing in this Agreement or the nature of the
      Placement Agents’ services shall be deemed to create a fiduciary or agency
      relationship between the Placement Agents and the Company or its affiliates
      or
      stockholders. 

    


    


    *
      * * * *
      * *


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    If
      the
      foregoing is in accordance with your understanding of our agreement, please
      sign
      and return to us the enclosed duplicate hereof, whereupon this Agreement shall
      represent a binding agreement between the Placement Agents and the
      Company.

     

    
      	
              Very
                truly yours,

            
	 
	
              Harbin
                Electric, Inc.

            
	 	 
	
              By:

            	  

	 	
              Name:

            
	 	
              Title:

            


    

     

    


    Accepted
      as of June 19, 2008

    


    
      	
              William
                Blair & Company, L.L.C.

            
	 	 
	
              By:

            	  

	 	
              Name:

            
	 	
              Title:

            
	 	 
	
              ROTH
                Capital Partners, LLC

            
	 	 
	
              By:

            	  

	 	
              Name:

            
	 	
              Title: