Unassociated Document


     

    December
      21, 2006

    Harbin
      Electric, Inc.

    No.
      9 Ha
      Ping Xi Lu, Ha Ping Lu Ji Zhong Qu 

    Harbin
      Kai Fa Qu, Harbin 

    People’s
      Republic of China 150060

    Attn:
      Tianfu Yang, Chairman and Chief Executive Officer

     

    Re:
      Harbin
      Electric, Inc.

     

    Mr.
      Yang:

    


    Reference
      is made to that certain Indenture dated as of August 30, 2006 (the “Indenture”),
      entered into among Harbin Electric, Inc. (the “Company”),
      Advanced Electric Motors, Inc., a wholly-owned subsidiary of the Company, as
      guarantor, and The Bank of New York, as trustee, with respect to the Company’s
      Guaranteed Senior Secured Floating Rate Notes due 2012 (the “2012
      Notes”)
      and
      the Company’s Guaranteed Senior Secured Floating Rate Notes due 2010 (the
“2010
      Notes”,
      and
      together with the 2012 Notes, the “Notes”). Capitalized terms used herein
      without definition shall have the meanings ascribed to such terms in the
      Indenture.

     

    The
      undersigned represents that, as of the date hereof, it is the holder of $ 26.5
      million in aggregate principal amount of the 2012 Notes. This amount constitutes
      a majority of the outstanding aggregate principal amount of the Notes currently
      outstanding.

     

    The
      undersigned hereby waives, until February 28, 2007, the Company’s obligation
      pursuant to and in compliance with Section 4.27 of the Indenture to appoint
      a
      senior financial officer on a full-time basis with the Company. In addition,
      the
      undersigned hereby irrevocably, unconditionally and completely waives any and
      all claims to Liquidated Damages that may otherwise have accrued prior to
      February 28, 2007 due to the Company’s failure to appoint a senior financial
      officer in compliance with Section 4.27 of the Indenture, provided that
      if the
      Company fails to appoint such financial officer, as described in Section 4.27
      of
      the Indenture, on or prior to February 28, 2007, the Company shall immediately
      thereafter pay the holders of the Notes such Liquidated Damages on a pro rata
      basis (proportionate to their respective holdings of the Notes then
      outstanding).

     

    In
      addition, the undersigned hereby agrees to amend that certain Purchase
      Agreement, dated August 29, 2006, by and among the Company, Advanced Electric
      Motors, Inc., the undersigned and Merrill Lynch International (the “Purchase
      Agreement”) to the effect that the reference to “the 120th
      day
      following the Closing Date” shall be substituted with “February 28, 2007”,
provided that
      (1)
      the
      Purchase Agreement shall otherwise remain in full force and effect and (2)
      all
      the other signatories to the Purchase Agreement thereto shall agree to so amend
      the Purchase Agreement in accordance with the terms thereof.

     

    This
      letter may be signed in one or more counterparts, each of which shall be deemed
      and original and all of which, taken together, shall constitute one and the
      same
      agreement. Any signature delivered by a party via telecopier shall be deemed
      to
      be an original signature hereto.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    


    
      	 	
              Very
                truly yours,

            
	 	 	 
	 	
              CITADEL
                EQUITY FUND LTD.

            
	 	 	 
	 	
              By:

            	 
	 	
              Its:

            	 
	 	 	 
	 	
              By:

            	
              _______________________________

            
	 	 	
              Name:
                

            
	 	 	
              Its:
                

            


    

     

    


    
      	
              CONSENTED
                AND AGREED TO BY:

               

            
	
              HARBIN
                ELECTRIC, INC.

               

            
	 	 
	
              By:

            	
              _______________________

            
	 	
              Name:
                Tianfu Yang

            
	 	
              Title:  
                Chairman and Chief Executive

            
	 	
              Officer