EMPLOYMENT
AGREEMENT

    

     

    THIS
AGREEMENT is dated as of the 25th day of
February, 2010 by and between Shengkai Innovations Inc., a Florida corporation
with its principal office at 27 Wanggang Road, Jin Nan (Shuang Gang) Economic
and Technology and Technology Development, Tianjin, People’s Republic of China
(the “Company”), and, David Ming He, residing at 1378 Perry St, Unit# 301,
Des Plaines, IL 60016, U.S.A. (“Executive”).

     

    WITNESSETH:

     

    WHEREAS,
the Company is desirous of engaging David Ming He as its Chief Financial Officer
and he is agreeable to being so appointed on the terms and conditions
hereinafter set forth.

     

    NOW,
THEREFORE, in consideration of the mutual promises set forth in this Agreement,
the parties agree as follows:

     

    1.      Effective Date of
Agreement.  This
Agreement and the obligations of the parties to adhere to the terms and
conditions contained herein shall not be deemed effective until (i) the earlier
of 30 days from the date of this Agreement, or (ii) the date that the Executive
has resolved any prior conflicts with his ability to assume his duties under the
terms of this Agreement.

     

    2.      Employment and
Duties.

     

    (a)           Subject
to the terms and conditions hereinafter set forth, the Company hereby employs
David Ming He as its Chief Financial Officer, and he shall have the duties and
responsibilities associated with a Chief Financial Officer of a public
corporation.  During the Term, as hereinafter defined,
Executive shall report to the Company’s Chief Executive Officer and
the audit committee of the board of directors. Executive  shall also
perform such other duties and responsibilities as may be determined by the
Company’s board of directors, audit committee and Chief Executive Officer, as
long as such duties and responsibilities are consistent with those of the
Company’s Chief Financial Officer.

     

    (b)           Executive shall
also serve in such executive capacity or capacities with respect to any
affiliate of the Company to which he may be elected or appointed, provided that
such duties are consistent with those of the Company’s Chief Financial
Officer.  During the Term, Executive shall receive no additional
compensation for services rendered pursuant to this Section
1(b).   For purposes of this Agreement, the term “affiliate”
shall mean an entity that is controlled by the Company.

     

    (c)           Unless
terminated earlier as provided in Section 5 of this Agreement, this Agreement
shall have an initial term (the “Initial Term”) commencing as of (i) the earlier
of 30 days from the date of this Agreement, or (ii) the date that the Executive
has resolved any prior conflicts with his ability to assume his duties under the
terms of this Agreement, and expiring on February 25, 2011, and continuing on a
year-to-year basis thereafter unless terminated by either party on not less than
thirty (30) days notice prior to the expiration of the Initial Term or any
one-year extension.  The Initial Term and the one-year extensions are
collectively referred to as the “Term.”

     

    3.      Performance.  Executive
hereby accepts the employment contemplated by this Agreement. During the Term,
he shall devote substantially all of his business time to the performance of his
duties under this Agreement, and shall perform such duties diligently, in good
faith and in a manner consistent with the best interests of the
Company.

     

    4.      Compensation and Other
Benefits.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    For his
services to the Company during the Term, the Company shall(a) pay Executive an
annual salary (“Salary”) at the rate of US$120,000 (say U.S. Dollars One Hundred
Twenty Thousand only) per annum, and (b) grant to Executive an option (“Option”)
to purchase 221,125 (Two Hundred Twenty One Thousand One Hundred Twenty Five)
shares of the Company’s common stock at an exercise price equivalent to the
closing price per share of common stock on the date of the grant, which option
shall vest in one-third installments over three years.

     

    All
Salary payments shall be payable in equal monthly installments at the end of
each calendar month, as the Company regularly pays its employees in accordance
with normal payroll practices.

     

    Executive’s
Salary as set forth above may be increased at the discretion of the compensation
committee of the Board of Directors.

     

    Cashless
exercise of the Option vested is allowed, with the number of shares of common
stock to be determined based on the following calculation: X = Y
[(A-B)/A]

    where:

     

    
      	
               
      

            	
              X =
      the number of shares of common stock to be issued to the
      Executive.

            


    

     

    
      	
               
      

            	
              Y =
      the number of shares of common stock with respect to which the Option is
      being exercised.

            


    

     

    
      	
               
      

            	
              A =
      the closing price for the first Trading Day immediately prior to the
      Exercise Date.

            


    

     

    
      	
               
      

            	
              B =
      the Exercise Price.

            


    

     

    5.      Reimbursement of
Expenses.  The Company shall reimburse Executive, upon
presentation of proper expense statements, for all authorized, ordinary and
necessary out-of-pocket expenses reasonably incurred by Executive  during
the Term in connection with the performance of his services pursuant to this
Agreement hereunder in accordance with the Company’s expense reimbursement
policy. 

     

    6.      Termination of
Employment.

     

    (a)           This
Agreement and Executive’s employment hereunder may be terminated by either for
any reason whatsoever, with or without cause, at any time within three (3)
months of the date of this Agreement (the “Probation Period”).

     

    (b)           This
Agreement and Executive’s employment hereunder shall terminate immediately upon
his death.

     

    (c)           This
Agreement and Executive’s employment pursuant to this Agreement, may be
terminated by him or the Company on not less than thirty (30) days’ written
notice in the event of Executive’s Disability. The term “Disability” shall mean
any illness, disability or incapacity of Executive which prevents him from
substantially performing his regular duties for a period of two (2) consecutive
months or three (3) months, even though not consecutive, in any twelve (12)
month period.  However, if Executive  is covered by long-term
disability insurance, the Company may not terminate this Agreement pursuant to
this Section 5(c) unless he  is eligible for disability payments under
his long-term disability insurance.

     

    (d)           The
Company may terminate this Agreement and Executive’s employment pursuant to this
Agreement for cause with no notice. The term “cause” shall mean:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i)           Repeated
failure to perform material instructions from the Company’s board of directors,
Chief Executive Office, Chief Operating Officer or audit committee,
provided that such instructions are reasonable and consistent with his duties as
set forth in Section 1 of this Agreement or any other failure or refusal by
Executive  to perform his duties required by said Section 1; provided,
however, that Executive shall have received notice from the Board specifying the
nature of such failure in reasonable detail and he shall have failed to cure the
failure within ten (10) business days after receipt of such notice:

     

    (ii)           a
breach of Section 6, 7 or 8 of this Agreement;

     

    (iii)           a
breach of trust whereby Executive obtains personal gain or benefit at the
expense of or to the detriment of the Company;

     

    (iv)            his
use of illegal substances;

     

    (v)            his
abuse of alcohol continuing after written notice from the board of directors or
the Company’s Chief Executive Officer or ;

     

    (vi)           any
fraudulent or dishonest conduct by Executive  or any other conduct by him,
which damages the Company or any of its affiliates or their property, business
or reputation;

     

    (vii)           a
conviction of or plea of nolo contendere by Executive of (A) any felony or (B)
any other crime involving fraud, theft, embezzlement or use or possession of
illegal substances; or

     

    (viii)                      the
admission by Executive of any matters set forth in Section 5(c)(vii) of this
Agreement.

     

    (ix)           failure
to ensure that the Company’s filings with the Securities and Exchange Commission
are on time;

     

    (x)           failure
to ensure the accuracy of Company’s filings with the Securities
and  Exchange Commission.

     

    (d)           Executive’s
resignation prior to the expiration of the Term, other than for Good Reason
shall be treated in the same manner as a termination for cause. The term “Good
Reason” shall mean:

     

    
      	
               
      

            	
              (i)

            	
              Any
      material breach by the Company of its obligations under this Agreement
      which are not cured within ten (10) business days after notice from
      Executive which sets forth in reasonable detail the nature of the
      breach.

            


    

     

    
      	
               
      

            	
              (ii)

            	
              Any
      change in Executive’s duties such that Executive is no longer the
      Company’s Chief Financial Officer, unless such change was made with his
      consent.

            


    

     

    
      	
               
      

            	
              (iii)

            	
              Any
      action on the part of the Company which impairs Executive’s ability to
      exercise his duties as the Company’s Chief Financial
    Officer.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6.      Trade Secrets and
Proprietary Information.  Executive  recognizes and
acknowledges that the Company, through the expenditure of considerable time and
money, has developed and will continue to develop in the future information
concerning customers, clients, marketing, products, services, business, research
and development activities and operational methods of the Company and its
customers or clients, contracts, financial or other data, technical data or
any other confidential or proprietary information possessed, owned or used by
the Company, the disclosure of which could or does have a material adverse
effect on the Company, its business, any business it proposes to engage in, its
operations, financial condition or prospects and that the same are confidential
and proprietary and considered “confidential information” of the Company for the
purposes of this Agreement. In consideration of his employment and engagement as
Chief Financial Officer, Executive agrees that he will not, during or after the
Term, without the consent of the Company’s Chief Executive Officer, make any
disclosure of confidential information now or
hereafter possessed by the Company, to any person, partnership, corporation or
entity either during or after the term here of, except that nothing in this
Agreement shall be construed to prohibit him from using or disclosing such
information (a) if such disclosure is necessary in the normal course of the
Company’s business in accordance with Company policies or instructions or
authorization from the board of directors or executive committee, (b) such
information shall become public knowledge other than by or as a result of
disclosure by a person not having a right to make such disclosure, (c) complying
with legal process; provided, that in the event he is required to make
disclosure pursuant to legal process, he  shall give the Company
prompt notice thereof and the opportunity to object to the disclosure, or (d)
subsequent to the Term, if such information shall have either (i) been developed
by him independent of any of the Company’s confidential or proprietary
information or (ii) been disclosed to him by a person not subject to a
confidentiality agreement with or other obligation of confidentiality to the
Company.  For the purposes of Sections 6, 7 and 8 of this Agreement,
the term “Company” shall include the Company, its parent, its subsidiaries and
its affiliates.

     

    7.      Covenant Not To Solicit or
Compete.

     

    (a)           During
the period from the date of this Agreement until one (1) year following the date
on which Executive’s employment is terminated, he will not, directly or
indirectly:

     

    (i)           Persuade
or attempt to persuade any person or entity which is or was a customer, client
or supplier of the Company to cease doing business with the Company, or to reduce the amount of
business it does with the Company (the terms “customer” and “client” as used in
this Section 7 to include any potential customer or client to whom the Company
submitted bids or proposals, or with whom the Company conducted negotiations,
during the term of Executive’s employment hereunder or during the twelve (12)
months preceding the termination of his employment);

     

    (ii)           solicit
for himself or any other person or entity other than the Company the business of
any person or entity which is a customer or client of the Company, or was a
customer or client of the Company within one (1) year prior to the termination
of his employment; or

     

    (iii)           persuade
or attempt to persuade any employee of the Company, or any individual who was an
employee of the Company during the one (1) year period prior to the lawful and
proper termination of this Agreement, to leave the Company’s employ, or to
become employed by any person or entity other than the Company.

     

    (b)                      Executive
acknowledges that the restrictive covenants (the “Restrictive Covenants”)
contained in Sections 6 and 7 of this Agreement are a condition of his
employment are reasonable and valid in geographical and temporal scope and in
all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall remain in full force and effect,
without regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have the
power to reduce the geographic or temporal scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be
enforceable.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    8.      Inventions and
Discoveries. Executive agrees promptly to disclose in writing to the
Company any invention or discovery made by him during the period of time that
this Agreement remains in full force and effect, whether during or after working
hours, in any business in which the Company is then engaged or which otherwise
relates to any product or service dealt in by the Company and such inventions
and discoveries shall be the Company’s sole property. Executive acknowledges
that any such invention or discovery developed by him and any intellectual
property rights relating thereto shall be considered as “work performed for
hire.”  In the event that any such intellectual property rights are
not, for any reason, deemed work performed for hire, Executive hereby assigns to
the Company any and all of his right, title and interest therein to the
Company.  Upon the Company’s request, Executive shall execute and
assign to the Company all applications for copyrights and letters patent of the
United States and such foreign countries as the Company may designate, and
Executive shall execute and deliver to the Company such other instruments as the
Company deems necessary to confirm the Company’s sole ownership of all rights,
title and interest in and to such inventions and discoveries, as well as all
copyrights and/or patents. If services in connection with applications for
copyrights and/or patents are performed by Executive at the Company’s request
after the termination of his employment hereunder, the Company shall pay his
reasonable compensation for such services rendered after termination of this
Agreement.

     

    9.      Injunctive Relief.
Executive agrees that his violation or threatened violation of any of the
provisions of Sections 6, 7 or 8 of this Agreement shall cause immediate and
irreparable harm to the Company. In the event of any breach or threatened breach
of any of said provisions, Executive consents to the entry of preliminary and
permanent injunctions by a court of competent jurisdiction prohibiting
him  from any violation or threatened violation of such provisions and
compelling him to comply with such provisions. In the event an injunction is
issued against any such violation by Executive, the period referred to in
Section 7 of this Agreement shall continue until the later of the expiration of
the period set forth therein or one (1) month from the date a final judgment
enforcing such provisions is entered and the time for appeal has
lapsed.  The provisions of Sections 6, 7, 8 and 9 of this Agreement
shall survive any termination of this Agreement and Executive’s employment
pursuant to this Agreement.

     

    10.           Miscellaneous.

     

    (a)           Executive represents,
warrants, covenants and agrees that he has a right to enter into this Agreement,
that he is not a party to any agreement or understanding, oral or written, which
would prohibit performance of his obligations under this Agreement, and that he
will not use in the performance of his obligations hereunder any proprietary
information of any other party which he is legally prohibited from
using.

     

    (b)           If
requested by the Company, Executive will cooperate with the Company in
connection with the Company’s application to obtain key-man life insurance on
his life, on which the Company will be the beneficiary. Such cooperation shall
include the execution of any applications or other documents requiring his
signature and submission of insurance applications and submission to a
physical.

     

    (c)           Any
notice, consent or communication required under the provisions of this Agreement
shall be given in writing and sent or delivered by hand, overnight courier or
messenger service, against a signed receipt or acknowledgment of receipt, or by
registered or certified mail, return receipt requested, or telecopier or similar
means of communication if receipt is acknowledged or if transmission is
confirmed by mail as provided in this Section 11(c), to the parties at
their respective addresses set forth at the beginning of this Agreement or by
telecopier to the Company at 27 Wanggang Road, Jin Nan (Shuang Gang) Economic
and Technology and Technology Development, Tianjin, People’s Republic of
China,  or to Executive at 1378 Perry St, Unit# 301, Des Plaines, IL
60016, with notice to the Company being sent to the attention of the individual
who executed this Agreement on behalf of the Company. Either party may, by like
notice, change the person, address or telecopier number to which notice is to be
sent.  If no telecopier number is provided for Executive, notice to
him shall not be sent by telecopier.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)           This
Agreement shall in all respects be construed and interpreted in accordance with,
and the rights of the parties shall be governed by, the laws of the State
of New York applicable to contracts executed and to be performed wholly
within such State, without regard to principles of conflicts of
laws.  The parties hereto agree to submit to the exclusive
jurisdiction of the state and federal courts of New York, New York.

     

    (e)           If
any term, covenant or condition of this Agreement or the application thereof to
any party or circumstance shall, to any extent, be determined to be invalid or
unenforceable, the remainder of this Agreement, or the application of such term,
covenant or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced to
the fullest extent permitted by law, and any court having jurisdiction may
reduce the scope of any provision of this Agreement, including the geographic
and temporal restrictions set forth in Section 7(a) of this Agreement, so that
it complies with applicable law.

     

    (f)           This
Agreement constitutes the entire agreement of the Company and Executive as
to the subject matter hereof, superseding all prior or contemporaneous written
or oral understandings or agreements, including any and all previous employment
agreements or understandings, all of which are hereby terminated, with respect
to the subject matter covered in this Agreement. This Agreement may not be
modified or amended, nor may any right be waived, except by a writing which
expressly refers to this Agreement, states that it is intended to be a
modification, amendment or waiver and is signed by both parties in the case of a
modification or amendment or by the party granting the waiver. No course of
conduct or dealing between the parties and no custom or trade usage shall be
relied upon to vary the terms of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.

     

    (g)           Neither
party hereto shall have the right to assign or transfer any of its or his rights
hereunder except in connection with a merger of consolidation of the Company or
a sale by the Company of all or substantially all of its business and
assets.

     

    (h)           This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, executors, administrators and permitted
assigns.

     

    (i)           The
headings in this Agreement are for convenience of reference only and shall not
affect in any way the construction or interpretation of this
Agreement.

     

    (j)           No
delay or omission to exercise any right, power or remedy accruing to either
party hereto shall impair any such right, power or remedy or shall be construed
to be a waiver of or an acquiescence to any breach hereof. No waiver of any
breach hereof shall be deemed to be a waiver of any other breach hereof
theretofore or thereafter occurring. Any waiver of any provision hereof shall be
effective only to the extent specifically set forth in an applicable writing.
All remedies afforded to either party under this Agreement, by law or otherwise,
shall be cumulative and not alternative and shall not preclude assertion by such
party of any other rights or the seeking of any other rights or remedies against
any other party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above
written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	 	SHENGKAI
      INNOVATIONS , INC.	 
	 	 	 	 
	
                                       

                                    	
                                      By:
      

                                    	/s/
      Chen Wang	 
	 	 	Chen
      Wang	 
	 	 	Chairman,
      and Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	Executive
      :	 
	 	 	 	 
	 	/s/David
      Ming He	 
	 	David
      Ming He