Document:

Exhibit 10.1

    Exhibit
      10.1

      

      REGISTRATION
        RIGHTS AGREEMENT

       

      

      THIS
        REGISTRATION RIGHTS AGREEMENT
        (this
“Agreement”)
        is
        dated as of August 31, 2005, by and between HARBIN ELECTRIC, INC., a Nevada
        corporation (the “Company”),
        and
        each of the entities whose names appear on the signature pages hereof. Such
        entities are, individually, referred to herein as a “Purchaser”
and,
        collectively, as the “Purchasers”.

       

      WHEREAS,
        the
        Company has agreed, on the terms and subject to the conditions set forth
        in the
        Common Stock Purchase Agreement of even date herewith (the “Common
        Stock Purchase Agreement”),
        to
        issue and sell to each Purchaser shares of the Company’s Common Stock (the
“Shares”);
        and

       

      WHEREAS,
        in
        order to induce each Purchaser to enter into the Common Stock Purchase
        Agreement, the Company has agreed to provide certain registration rights
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).
        Capitalized terms used herein and not otherwise defined shall have the
        respective meanings set forth in the Common Stock Purchase Agreement.

       

      In
        consideration of each Purchaser entering into the Common Stock Purchase
        Agreement, and for other good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, the parties hereto hereby agree
        as
        follows: 

       

      	1.             	
              DEFINITIONS.

            

       

      For
        purposes of this Agreement, the following terms shall have the meanings
        specified:

       

      (a)  “Effective
        Date”
means
        the date on which the Registration Statement (as defined below) is declared
        effective by the Securities and Exchange Commission (the “Commission”);

       

      (b)  “Holder”
means
        any person owning or having the right to acquire Shares;

       

      (c)  “Filing
        Deadline”
means
        the 90th
        day
        following the Closing Date; 

       

      (d)  “Register”,
        “registered”
and
        “registration”
refer
        to a registration effected by preparing and filing a registration statement
        or
        statements in compliance with the 

      Securities
        Act and the declaration or ordering of effectiveness of such registration
        statement by the Commission;

       

      (e)  “Registration
        Period”
has
        the
        meaning set forth in paragraph 2(c) below; and 

       

      (f)  “Registration
        Statement”
means
        the Registration Statement relating to resales of the Shares.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      	2. 
                         	
              REGISTRATION.

            

       

      (a)  Registration
        Statement.
        On or
        before the Filing Deadline, the Company shall prepare and file with the
        Commission a Registration Statement on Form SB-2 or other applicable form
        covering the resale of the Shares. 

       

      (b)  Effectiveness.
        The
        Company shall use its reasonable best efforts to cause the Registration
        Statement to become effective as soon as practicable following the filing
        thereof. The Company shall respond promptly to any and all comments made
        by the
        staff of the Commission on the Registration Statement, and, if the Company
        learns that no review of a Registration Statement will be made by the staff
        of
        the Commission or that the staff of the Commission has no further comments
        on
        the Registration Statement, shall submit to the Commission a request for
        acceleration of the effectiveness of the Registration Statement. Subject
        to the
        provisions of Section 4, the Company will maintain the effectiveness of the
        Registration Statement until the earlier to occur of (i) the date on which
        all of the Shares have been publicly sold pursuant to either the Registration
        Statement or Rule 144 and (ii) the date on which all of the Shares
        remaining to be sold under the Registration Statement (in the reasonable
        opinion
        of counsel to the Holder) may be immediately sold to the public without
        registration (the period beginning on the Closing Date and ending on the
        earlier
        to occur of (i) or (ii) above being referred to herein as the “Registration
        Period”).

       

      	3.          
                	
              PIGGYBACK
                REGISTRATION.

            

       

      If
        at any
        time prior to the expiration of the Registration Period, (i) the Company
        proposes to register shares of Common Stock under the Securities Act in
        connection with the public offering of such shares for cash (a “Proposed
        Registration”)
        and
        (ii) a registration statement covering the sale of all of the Shares is not
        then
        effective and available for sales thereof by the Holders, the Company shall,
        at
        such time, promptly give each Holder written notice of such Proposed
        Registration. Each Holder shall have five (5) Business Days from its receipt
        of
        such notice to deliver to the Company a written request specifying the number
        of
        Shares that such Holder intends to sell and such Holder’s intended method of
        distribution. Upon receipt of such request, the Company shall use its best
        efforts to cause all Shares which the Company has been requested to register
        to
        be registered under the Securities Act to the extent necessary to permit
        their
        sale or other disposition in accordance with the intended methods of
        distribution specified in the request of such Holder; provided, however,
        that
        the Company shall have the right to postpone or withdraw any registration
        effected pursuant to this Section 3 without obligation to the Holder. If,
        in
        connection with any underwritten public offering for the account of the Company
        or for stockholders of the Company that have contractual rights to require
        the
        Company to register shares of Common Stock, the managing underwriter or
        underwriters thereof shall impose a limitation on the number of shares of
        Common
        Stock which may be included in a registration statement because, in the judgment
        of such underwriter or underwriters, marketing or other factors dictate such
        limitation is necessary to facilitate such offering, then the Company shall
        be
        obligated to include in such registration statement only such limited portion
        of
        the Shares with respect to which each Holder has requested inclusion thereunder
        as such underwriter or underwriters shall permit. Any exclusion of Shares
        shall
        be made pro
        rata
        among
        the Holders seeking to include Shares in a registration statement, in proportion
        to the number of Shares sought to be included by such Holders; provided,
        however, that the Company shall not exclude any Shares unless the Company
        has
        first excluded all outstanding securities, the holders of which are not entitled
        to inclusion of such securities in such registration statement or are not
        entitled to pro
        rata
        inclusion with the Shares; and provided further, that after giving effect
        to the
        immediately preceding proviso, any exclusion of Shares shall be made
pro
        rata
        with
        holders of other securities having the right to include such securities in
        the
        registration statement. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      	4.           
                	
              OBLIGATIONS
                OF THE COMPANY.

            

       

      In
        addition to performing its obligations hereunder, including without limitation
        those pursuant to Section 2, the Company shall, with respect to the Registration
        Statement: 

       

      (a)  prepare
        and file with the Commission such amendments and supplements to such
        Registration Statement and the prospectus used in connection with the
        Registration Statement as may be necessary to comply with the provisions
        of the
        Securities Act or to maintain the effectiveness of the Registration Statement
        during the Registration Period, or as may be reasonably requested by a Holder
        in
        order to incorporate information concerning such Holder or such Holder’s
        intended method of distribution; 

       

      (b)  furnish
        to each Holder such number of copies of the prospectus included in the
        Registration Statement, including a preliminary prospectus, in conformity
        with
        the requirements of the Securities Act, and such other documents as such
        Holder
        may reasonably request in order to facilitate the disposition of such Holder’s
        Shares; 

       

      (c)  use
        all
        commercially reasonable efforts to register or qualify the Shares under the
        securities or “blue sky” laws of such jurisdictions within the United States as
        shall be reasonably requested from time to time by a Holder, and do any and
        all
        other acts or things which may be necessary or advisable to enable such Holder
        to consummate the public sale or other disposition of the Shares in such
        jurisdictions; provided that the Company shall not be required in connection
        therewith or as a condition thereto to qualify to do business or to file
        a
        general consent to service of process in any such jurisdiction;

       

      (d)  notify
        each Holder immediately after becoming aware of the occurrence of any event
        or
        condition as a result of which the prospectus included in the Registration
        Statement, as then in effect, contains an untrue statement of material fact
        or
        omits to state a material fact required to be stated therein or necessary
        to
        make the statements therein not misleading in light of the circumstances
        then
        existing, and as promptly as practicable, prepare, file and furnish to each
        Holder a reasonable number of copies of a supplement or an amendment to such
        prospectus as may be necessary so that such prospectus does not contain an
        untrue statement of material fact or omit to state a material fact required
        to
        be stated therein or necessary to make the statements therein not misleading
        in
        light of the circumstances then existing, provided that, for not more than
        thirty (30) consecutive Business Days (or a total of not more than sixty
        (60)
        calendar days in any twelve (12) month period), in the event of a proposed
        merger or similar transaction, the Company may delay the disclosure of material
        non-public information concerning such transaction the public disclosure
        of
        which at the time is not, in the good faith opinion of the Board of Directors
        of
        the Company, in the best interests of the Company and which may, based on
        the
        written advice of outside counsel, be delayed under applicable law or regulation
        (an “Allowed
        Delay”);
        provided, further, that the Company shall promptly (i) notify each Holder
        in
        writing of the existence of material non-public information giving rise to
        an
        Allowed Delay (but in no event, without the prior written consent of such
        Holder, shall the Company disclose to such Holder any of the facts or
        circumstances regarding any material non-public information) and (ii) advise
        each Holder in writing to cease all sales under such Registration Statement
        until the termination of the Allowed Delay; 

       

       

      
        
          
          

        

        
          3

        

        
          
            

          

        

         

        (e)  use
          all
          commercially reasonable efforts to prevent the issuance of any stop order
          or
          other order suspending the effectiveness of such Registration Statement
          and, if
          such an order

        is
          issued, to obtain the withdrawal thereof at the earliest possible time
          and to
          notify each Holder of the issuance of such order and the resolution
          thereof;

      

       

      (f)  furnish
        to each Holder, on the date that such Registration Statement becomes effective,
        a letter, dated such date, of outside counsel representing the Company (and
        reasonably acceptable to such Holder) addressed to such Holder, confirming
        the
        effectiveness of such Registration Statement and, to the knowledge of such
        counsel, the absence of any stop order, (A) a copy of an opinion, dated such
        date, of such outside counsel, in such form and substance as is required
        to be
        given to the underwriters, and (B) a letter addressed to such Holder, dated
        such
        date, from the Company’s independent certified public accountants, in such form
        and substance as is required to be given by the Company’s independent certified
        public accountants to such underwriters;

       

      (g)  provide
        to each Holder and its representatives the reasonable opportunity to conduct
        a
        reasonable inquiry of the Company’s financial and other records during normal
        business hours and make available its officers, directors and employees for
        questions regarding information which such Holder may reasonably request
        in
        order to fulfill any due diligence obligation on its part; and

       

      (h)  permit
        counsel for each Holder to review the Registration Statement and all amendments
        and supplements thereto, and any comments made by the staff of the Commission
        concerning such Holder and/or the transactions contemplated by the Transaction
        Documents and the Company’s responses thereto, within a reasonable period of
        time prior to the filing thereof with the Commission (or, in the case of
        comments made by the staff of the Commission, within a reasonable period
        of time
        following the receipt thereof by the Company).

       

      	5.             	
              OBLIGATIONS
                OF EACH HOLDER.

            

       

      In
        connection with the registration of the Shares pursuant to the Registration
        Statement, each Holder shall: 

       

      (a)  timely
        furnish to the Company in writing such information regarding itself and the
        intended method of disposition of the Shares (which shall not include an
        underwritten of the offering) as the Company shall reasonably request in
        order
        to effect the registration thereof; 

       

      (b)  upon
        receipt of any notice from the Company of the happening of any event of the
        kind
        described in paragraphs 4(e) or 4(f), immediately discontinue any sale or
        other
        disposition of such Shares pursuant to such Registration Statement until
        the
        filing of an amendment or supplement as described in paragraph 4(e) or
        withdrawal of the stop order referred to in paragraph 4(f), and use commercially
        reasonable efforts to maintain the confidentiality of such notice and its
        contents; 

       

      
        
          
          

        

        
          4

          
            

          

        

         

        (c)  to
          the
          extent required by applicable law, deliver a prospectus to the purchaser
          of the
          Shares; 

      

       

      (d)  notify
        the Company when it has sold all of the Shares held by it; 

       

      (e)  notify
        the Company in the event that any information supplied by such Holder in
        writing
        for inclusion in such Registration Statement or related prospectus is untrue
        or
        omits to state a material fact required to be stated therein or necessary
        to
        make such information not misleading in light of the circumstances then
        existing; immediately discontinue any sale or other disposition of the Shares
        pursuant to the Registration Statement until the filing of an amendment or
        supplement to such prospectus as may be necessary so that such prospectus
        does
        not contain an untrue statement of material fact or omit to state a material
        fact required to be stated therein or necessary to make the statements therein
        not misleading in light of the circumstances then existing; and use commercially
        reasonable efforts to assist the Company as may be appropriate to make such
        amendment or supplement effective for such purpose; and

       

      (f)  not
        take,
        and cause the persons under its direction or control not to take, any action
        during the term of this Agreement designed to stabilize or manipulate the
        price
        of any security of the Company.

       

      	6.          
                	
              INDEMNIFICATION.

            

       

      In
        the
        event that any Shares are included in the Registration Statement under this
        Agreement: 

       

      (a)  To
        the
        extent permitted by law, the Company shall indemnify and hold harmless each
        Holder, the officers, directors, employees, agents and representatives of
        such
        Holder, and each person, if any, who controls such Holder within the meaning
        of
        the Securities Act or the Securities Exchange Act of 1934, as amended (the
        “Exchange
        Act”),
        against any losses, claims, damages, liabilities or reasonable out-of-pocket
        expenses (whether joint or several) (collectively, including legal or other
        expenses reasonably incurred in connection with investigating or defending
        same,
“Losses”),
        insofar as any such Losses arise out of or are based upon (i) any untrue
        statement or alleged untrue statement of a material fact contained in such
        Registration Statement, including any preliminary prospectus or final prospectus
        contained therein or any amendments or supplements thereto, or (ii) the omission
        or alleged omission to state therein a material fact required to be stated
        therein, or necessary to make the statements therein, in light of the
        circumstances under which they were made, not misleading. Subject to the
        provisions of paragraph 6(c) below, the Company will reimburse such Holder,
        and
        each such officer, director, employee, agent, representative or controlling
        person, for any legal or other expenses as reasonably incurred by any such
        entity or person in connection with investigating or defending any such Losses;
        provided, however, that the foregoing indemnity shall not apply to amounts
        paid
        in settlement of any Loss if such settlement is effected without the consent
        of
        the Company (which consent shall not be unreasonably withheld), nor shall
        the
        Company be obligated to indemnify any person for any Loss to the extent that
        such Loss is based upon and is in conformity with written information furnished
        by such person expressly for use in such Registration Statement.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          
(b)  To
          the
          extent permitted by law, each Holder who is named in such Registration
          Statement
          as a selling stockholder, acting severally and not jointly, shall indemnify
          and
          hold harmless the Company, the officers, directors, employees, agents and
          representatives of the Company, and each person, if any, who controls the
          Company within the meaning of the Securities Act or the Exchange Act, against
          any Losses to the extent (and only to the extent) that any such Losses
          are based
          upon and in conformity with written information furnished by such Holder
          expressly for use in such Registration Statement. Subject to the provisions
          of
          paragraph 6(c) below, such Holder will reimburse any legal or other expenses
          as
          reasonably incurred by the Company and any such officer, director, employee,
          agent, representative, or controlling person, in connection with investigating
          or defending any such Loss; provided, however, that the foregoing indemnity
          shall not apply to amounts paid in settlement of any such Loss if such
          settlement is effected without the consent of such Holder (which consent
          shall
          not be unreasonably withheld); and provided, further, that, in no event
          shall
          any indemnity under this subsection 6(b) exceed the net proceeds resulting
          from
          the sale of the Shares sold by such Holder under such Registration
          Statement.

      

       

      (c)  Promptly
        after receipt by an indemnified party under this Section 6 of notice of the
        commencement of any action (including any governmental action), such indemnified
        party will, if a claim in respect thereof is to be made against any indemnifying
        party under this Section 6, deliver to the indemnifying party a written
        notice of the commencement thereof and the indemnifying party shall have
        the
        right to participate in and to assume the defense thereof with counsel mutually
        satisfactory to the parties; provided, however, that an indemnified party
        shall
        have the right to retain its own counsel, with the reasonably incurred fees
        and
        expenses of one such counsel for all indemnified parties to be paid by the
        indemnifying party, if representation of such indemnified party by the counsel
        retained by the indemnifying party would be inappropriate under applicable
        standards of professional conduct due to actual or potential conflicting
        interests between such indemnified party and any other party represented
        by such
        counsel in such proceeding. The failure to deliver written notice to the
        indemnifying party within a reasonable time of the commencement of any such
        action, to the extent prejudicial to its ability to defend such action, shall
        relieve such indemnifying party of any liability to the indemnified party
        under
        this Section 6 with respect to such action, but the omission so to deliver
        written notice to the indemnifying party will not relieve it of any liability
        that it may have to any indemnified party otherwise than under this Section
        6 or
        with respect to any other action unless the indemnifying party is materially
        prejudiced as a result of not receiving such notice.

       

      (d)  In
        the
        event that the indemnity provided in paragraph (a) or (b) of this Section
        6 is
        unavailable or insufficient to hold harmless an indemnified party for any
        reason, the Company and each Holder agree, severally and not jointly, to
        contribute to the aggregate Losses to which the Company or such Holder may
        be
        subject in such proportion as is appropriate to reflect the relative fault
        of
        the Company and such Holder in connection with the statements or omissions
        which
        resulted in such Losses; provided, however, that in no case shall such Holder
        be
        responsible for any amount in excess of the proceeds resulting from the sale
        of
        the Shares sold by it under the Registration Statement. Relative fault shall
        be
        determined by reference to whether any alleged untrue statement or omission
        relates to information provided by the Company or by such Holder. The Company
        and each Holder agree that it would not be just and equitable if contribution
        were determined by pro
        rata
        allocation or any other method of allocation which does not take account
        of the
        equitable considerations referred to above. Notwithstanding the provisions
        of
        this paragraph (d), no person guilty of fraudulent misrepresentation (within
        the
        meaning of Section 11(f) of the Securities Act) shall be entitled to
        contribution from any person who is not guilty of such fraudulent
        misrepresentation. For purposes of this Section 6, each person who controls
        a
        Holder within the meaning of either the Securities Act or the Exchange Act
        and
        each officer, director, employee, agent or representative of such Holder
        shall
        have the same rights to contribution as such Holder, and each person who
        controls the Company within the meaning of either the Securities Act or the
        Exchange Act and each officer, director, employee, agent or representative
        of
        the Company shall have the same rights to contribution as the Company, subject
        in each case to the applicable terms and conditions of this paragraph
        (d).

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

        (e)  The
          obligations of the Company and each Holder under this Section 6 shall
          survive the completion of any offering or sale of Shares pursuant to a
          Registration Statement under this Agreement, or otherwise.

      

       

      	7.        
                  	
              MISCELLANEOUS.

            

       

      (a)  Expenses
        of Registration.
        All
        reasonable expenses, other than underwriting discounts and commissions and
        fees
        and expenses of counsel to each Holder, incurred in connection with the
        registrations, filings or qualifications described herein, including (without
        limitation) all registration, filing and qualification fees, printers’ and
        accounting fees, the fees and disbursements of counsel for the Company, shall
        be
        borne by the Company.

       

      (b)  Amendment;
        Waiver.
        Any
        provision of this Agreement may be amended or waived only pursuant to a written
        instrument executed by the Company and each Holder. Any amendment or waiver
        effected in accordance with this paragraph shall be binding upon each Holder,
        each future Holder, and the Company. The failure of any party to exercise
        any
        right or remedy under this Agreement or otherwise, or the delay by any party
        in
        exercising such right or remedy, shall not operate as a waiver
        thereof.

       

      (c)  Notices.
        Any
        notice, demand or request required or permitted to be given by the Company
        or a
        Holder pursuant to the terms of this Agreement shall be in writing and shall
        be
        deemed delivered (i) when delivered personally or by verifiable facsimile
        or
        electronic transmission, unless such delivery is made on a day that is not
        a
        Business Day, in which case such delivery will be deemed to be made on the
        next
        succeeding Business Day, (ii) on the second Business Day after timely delivery
        to an overnight courier and (iii) on the Business Day actually received if
        deposited in the U.S. mail (certified or registered mail, return receipt
        requested, postage prepaid), addressed as follows: 

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      If
        to
        the Company:

      

      Harbin
        Electric, Inc.

      No.
        9 Ha
        Ping Xi Lu

      Ha
        Ping
        Lu Ji Zhong Qu

      Harbin
        Kai Fa Qu

      Harbin,
        China 150060

      Attn: Chungang
        Xia

      Tel: +86-451-86116757

      Fax: +86-451-86116769

      

      with
        a copy to:
        

      

      Reed
        Smith LLP

      435
        Sixth
        Avenue

      Pittsburgh,
        PA 15219

      Attn: Stephen
        W. Johnson 

      Tel: 412-288-7166

      Fax: 412-288-3063

      

      and
        if to
        a Holder, to such address as shall be designated by such Holder in writing
        to
        the Company. 

       

      (d)  Assignment.
        Upon
        the transfer of any Shares by a Holder, the rights of such Holder hereunder
        with
        respect to such Shares shall be assigned automatically to the transferee
        thereof, and such transferee shall thereupon be deemed to be a “Holder” for
        purposes of this Agreement, as long as: (i) the Company is, within a reasonable
        period of time following such transfer, furnished with written notice of
        the
        name and address of such transferee, (ii) the transferee agrees in writing
        with
        the Company to be bound by all of the provisions hereof, and (iii) such transfer
        is made in accordance with the applicable requirements of the Common Stock
        Purchase Agreement; provided, however, that the registration rights granted
        in
        this Agreement shall not be transferred to any person or entity that receives
        any Shares pursuant to an effective registration statement under the Securities
        Act or pursuant to a public transaction under Rule 144 or any successor
        provision thereto.

       

      (e)  Counterparts.
        This
        Agreement may be executed in counterparts, each of which shall be deemed
        an
        original, and all of which together shall be deemed one and the same instrument.
        This Agreement, once executed by a party, may be delivered to any other party
        hereto by facsimile transmission.

       

      (f)  Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Nevada applicable to contracts made and to be performed entirely
        within
        the State of Nevada.

       

      

      [Signature
        Page to Follow]

      
        
           

          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

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

       

      
        	
                 

                The
                  Company:

                 

              
	
                HARBIN
                  ELECTRIC, INC.,

                a
                  Nevada corporation

                 

                By:
                  /s/ Tianfu
                  Yang  

                
                  

                

                Name: Tianfu
                  Yang

                Title: CEO
                  and Chairman

                 

                 

              
	
                 

                The
                  Purchasers:

                 

              
	
                Lake
                  Street Fund, L.P.

                 

                 

                By:/s/ Scott
                  W. Hood 

                
                  

                

                Name: Scott
                  W. Hood

                Title: Investment
                  Manager

                President
                  FWSM

              	
                Fred
                  L. Astman & Jean L. Astman JT-WROS

                 

                 

                By:/s/ Fred
                  L. Astman  

                
                  

                

                Name: Fred
                  L. Astman

                 

                By:
                  /s/ Jean
                  L. Astman 

                
                  
 Name: Jean
                  L. Astman

              
	
                Fred
                  L. Astman & Jean

                 

                 

                By:
                  /s/ Fred
                  L. Astman  

                
                  
Name: Fred
                  L. Astman

              	
                Scott
                  Hood

                 

                 

                By:
                  /s/ Scott
                  W. Hood

                
                  

                

                Name: Scott
                  W. Hood 

                 

              
	
                Howard
                  Lu

                 

                 

                By:
                  /s/ Howard
                  Lu 

                
                  

                

                Name: Howard
                  Lu

                 

              	
                Shu
                  Hua Lu

                 

                 

                By:/s/ Shu
                  Hua Lu  

                
                  
Name: Shu
                  Hua Lu

                 

              

      

       

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

      
        	
                J.
                  Peter Selda

                 

                 

                By:
                  /s/ J.
                  Peter Selda  

                
                  

                

                Name: J.
                  Peter Selda 

                IRS
                  Rollover

                 

              	
                R.
                  Gregg Hillman

                 

                 

                By:
                  /s/ R.
                  Gregg Hillman  

                
                  

                

                Name: R.
                  Gregg Hillman

                 

              
	
                Midsouth
                  Investor Fund LP

                 

                 

                By:/s/ Lyman
                  O. Heidtke  

                
                  

                

                Name: Lyman
                  O. Heidtke

                Title: General
                  Partner

                 

              	
                Lyman
                  O. Heidtke

                 

                 

                By:
                  /s/ Lyman
                  O. Heidtke  

                
                  

                

                Name: Lyman
                  O. Heidtke

                 

              
	
                David
                  Moy

                 

                 

                By:/s/ David
                  Moy  

                
                  

                

                Name: David
                  Moy 

              	
                Lighthouse
                  Consulting Limited

                 

                 

                By:
                  /s/ Bai
                  Ye Feng  

                
                  

                

                Name: Bai
                  Ye Feng

                Title: Director

              
	
                Anthony
                  G. Polak

                 

                 

                By:/s/ Anthony
                  G. Polak 

                
                  

                

                Name: Anthony
                  G. Polak

                 

              	
                Anthony
                  G. Polak “S”

                 

                 

                By:/s/ Anthony
                  G. Polak “S”  

                
                  
Name: Anthony
                  G. Polak “S”

              
	
                Frederick
                  B. Polak “S”

                 

                 

                By:/s/ Frederick
                  B. Polak “S”  

                
                  

                

                Name: Frederick
                  B. Polak “S”

                 

              	
                Margrit
                  B. Polak “S”

                 

                 

                By:/s/ Margrit
                  B Polak “S”  

                
                  

                

                Name: Margrit
                  B. Polak “S”

              

      

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      
        	
                Domaco
                  Venture Capital Fund

                 

                 

                By:/s/ Jack
                  Polak  

                
                  

                

                Name: Jack
                  Polak

                Title: General
                  Partner

                 

              	
                Catharina
                  Polak #2 Trust 

                 

                 

                By:
                  /s/ Jack
                  Polak   

                
                  

                

                Name: Jack
                  Polak

                Title: Trustee

                 

                By:
                  /s/ Catharina
                  Polak   

                
                  

                

                Name: Catharina
                  Polak

                Title: Trustee

              
	
                Ronald
                  M. Lazar

                 

                 

                By:/s/ Ronald
                  M. Lazar  

                
                  

                

                Name: Ronald
                  M. Lazar

                 

              	
                Dennis
                  C. Loeser

                 

                 

                By:
                  /s/ Dennis
                  C. Loeser  

                
                  

                

                Name: Dennis
                  C. Loeser

                 

              
	
                Geri
                  Investments N.V. 

                 

                 

                By:/s/ Marinus
                  J. Dekker  

                
                  

                

                Name: Marinus
                  J. Dekker

                Title: Managing
                  Partner

                 

              	
                RL
                  Capital Partners, L.P. 

                 

                 

                By:
                  /s/ Ronald
                  M. Lazar  

                
                  

                

                Name: Ronald
                  M. Lazar

                Title: Managing
                  MemberExhibit
      10.2

    COMMON
      STOCK PURCHASE AGREEMENT

     

     

    THIS
      COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)
      is
      dated as of August 31, 2005, by and among HARBIN ELECTRIC, INC., a Nevada
      corporation (the “Company”),
      Mr.
      Tian Fu Yang, a resident of Heilongjiang Province, PRC (the “Executive”),
      and
      each of the entities whose names appear on the signature pages hereof. Such
      entities are, individually, referred to herein as a “Purchaser”
and,
      collectively, as the “Purchasers.”

     

    WHEREAS,
      the
      Company wishes to sell to the Purchasers, and the Purchasers wish to purchase,
      on the terms and subject to the conditions set forth in this Agreement, an
      aggregate of up to 1,600,000 shares of the Company’s Common Stock, par value
      $0.00001 (the “Shares”),
      at a
      price of $3.00 per share; 

     

    WHEREAS,
      the
      Company wishes to grant to the Purchasers, and the Purchasers wish to accept,
      on
      terms and subject to the conditions set forth in this Agreement, the option
      to
      purchase an aggregate of up to 480,000 Shares, at a price of $3.50 per share;
      

     

    WHEREAS,
      the
      Executive wishes to make certain personal guarantees with respect to the
      performance of the Company, all in accordance with the terms and conditions
      hereinafter provided;

     

    WHEREAS,
      the
      sale of the Shares by the Company to the Purchasers will be effected in reliance
      upon the exemption from securities registration afforded by the provisions
      of
      Regulation D (“Regulation
      D”),
      as
      promulgated by the Commission under the Securities Act; and

     

    WHEREAS,
      the
      Company has agreed to effect the registration of the Shares under the Securities
      Act of 1933, as amended (the “Securities
      Act”),
      pursuant to a certain Registration Rights Agreement of even date (the
“Registration
      Rights Agreement”),
      by
      and between the Company and the Purchasers, in substantially the form attached
      hereto as Exhibit
      “A”.

     

    NOW,
      THEREFORE,
      for
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the Company and each Purchaser hereby agree as
      follows:

     

    1.  DEFINED
      TERMS.
      When
      used herein, the following terms shall have the respective meanings
      indicated:

     

    “Business
      Day”
means
      any day on which the commercial banks in the Untied States are open for
      business.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.00001.

     

    “Exchange
      Act”
means
      the Shares Exchange Act of 1934, as amended (or any successor act), and the
      rules and regulations thereunder (or respective successors
      thereto).

     

    “Material
      Adverse Effect”
means
      an effect that has material and adverse consequences on (i) the consolidated
      business, operations, properties, financial condition, or results of operations
      of the Company and its Subsidiaries taken as a whole or (ii) the ability of
      the
      Company to perform its obligations under this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Net
      Income”
shall
      have the meaning set forth in Section 3.3 of this Agreement. 

     

    “Subsidiaries”
means
      Advanced Electric Motors, a Delaware corporation and wholly-owned subsidiary
      of
      the Company, and Tech Full Electric Co., Ltd., a Chinese company and
      wholly-owned subsidiary of Advanced Electric Motors.

     

    “Trading
      Day”
shall
      mean any day on which the Common Stock is purchased and sold on the principal
      market on which the Common Stock is then listed or traded.

     

    “Transaction
      Documents”
means
      this Agreement and the Registration Rights Agreement.

     

    2.  PURCHASE
      AND SALE OF SHARES; PURCHASE PRICE.
      

     

    2.1  Sale
      and Purchase of Shares.
      Upon
      the terms and subject to the conditions set forth herein, the Company agrees
      to
      sell and each Purchaser agrees to purchase an aggregate of up to 1,600,000
      Shares for the Purchase Price set out in Section 2.3, which Purchase Price
      shall
      be paid in cash in accordance with Section 2.4. 

     

    2.2  Closing;
      Closing Date.
      The
      date on which the closing of the purchase and sale of the Shares occurs (the
      “Closing”)
      is
      hereinafter referred to as the “Closing
      Date”.
      Subject to the satisfaction or waiver of the conditions set forth herein, the
      Closing will be deemed to occur when (a) this Agreement and the other
      Transaction Documents have been executed and delivered by, respectively, the
      Company and each Purchaser (which delivery may be effected by facsimile
      transmission), and (b) full payment of each Purchaser’s Purchase Price has been
      made by such Purchaser by wire transfer of immediately available funds to an
      account designated by the Company against physical delivery by the Company
      of
      duly executed certificates representing the Shares purchased by such Purchaser.
      A different Closing may occur for each Purchaser. The Company reserves the
      right
      to reject any offer to purchase the Shares.

     

    2.3  Purchase
      Price.
      As
      consideration for the sale of the Shares to the Purchasers, the Purchasers
      shall
      pay collectively an aggregate purchase price of $4,800,000. This sum, as it
      may
      be adjusted pursuant to this Agreement, is the “Purchase
      Price.”
The
      portion of the Purchase Price to be paid by each Purchaser (the “Closing
      Amount”)
      is set
      fort beneath each Purchaser’s signature on the signature page hereto.

     

    2.4  Payment
      of the Purchase Price.
      The
      Purchasers shall, on the Closing Date, transfer to the designated bank account,
      by wire transfer of immediately available funds no later than 2:00 in the
      afternoon (New York time) the Closing Amount, as follows: 

     

    Bank:
      SHANGHAI PUDONG DEVELOPMENT BANK HARBIN BRANCH 

     

    Bank
      Address: No.200 Hanshui Road, Nangang District, Post Code 150090, 

     

    Harbin,
      Heilongjiang Province, China

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Swift
      Bic: SPDBCNSH650

     

    Beneficiary:
      Harbin Tech.Full Electric Co., Ltd.

     

    Credit
      A/C No.:65011455300000072

    

    You
      may
      choose anyone from our correspondent U.S.D. settling banks:

     

    1.
      Bank
      of America N.A. New York (SWIFT BIC:BOFAUS3N)

     

    2.
      Citi
      Bank N.A. New York (SWIFT BIC:CITIUS33)

     

    3.
      American Express Bank (SWIFT BIC:AEIBUS33)

     

    4.
      SWIFT:
      CHASUS33XXX

     

    3.  POST-CLOSING
      ADJUSTMENTS TO PURCHASE PRICE.
      

     

    3.1  Escrow.
      As soon
      as practicable, but in any event within 45 days after the Closing Date, the
      Executive shall transfer 480,000 Shares (the “Escrow
      Amount”),
      personally owned by him, into an escrow (the “Escrow
      Account”)
      with
      an escrow company (the “Escrow
      Agent”).
      

     

    3.2  2005
      Performance Guaranty.
      The
      Company shall deliver the audited consolidated financial statements for the
      Company, prepared in accordance with GAAP, for the year ended December 31,
      2005
      (the “2005
      Financial Statements”)
      to the
      Purchasers on or before April 30, 2006. If the 2005 Net Income (as derived
      from
      the audited 2005 Financial Statements) is less than $9,400,000 (the
“2005
      Threshold Amount”),
      then
      the Escrow Agent shall transfer 240,000 Shares from the Escrow Account and
      distribute such Shares to the Purchasers in the aggregate, and to each
      Purchaser, in the same proportion as each Purchaser’s Closing Amount bears to
      the aggregate Purchase Price.

     

    3.3  2006
      Performance Guaranty.
      The
      Company shall deliver the audited consolidated financial statements for the
      Company, prepared in accordance with GAAP, for the year ended December 31,
      2006
      (the “2006
      Financial Statements”)
      to the
      Purchasers on or before April 30, 2007 (the “Final
      Adjustment Determination Date”).
      If
      the 2006 Net Income (as derived from the audited 2006 Financial Statements)
      is
      less than $12,400,000 (the “2006
      Threshold Amount”),
      then
      the Escrow Agent shall transfer 240,000 Shares from the Escrow Account and
      distribute such Shares to the Purchasers in the aggregate, and to each
      Purchaser, in the same proportion as each Purchaser’s Closing Amount bears to
      the aggregate Purchase Price.

     

    3.4  Release
      of Escrow.
      As soon
      as practicable, but in any event within 45 days after the Final Adjustment
      Determination Date, the Escrow Agent shall release to the Executive the Escrow
      Amount to the extent not previously applied by the Escrow Agent as necessary
      to
      satisfy the performance guarantees of this Article 3. 

     

    3.5  GRANT
      OF OPTION.
      Simultaneous with the Closing, the Company shall grant Options to the Purchasers
      pursuant to certain Stock Option Agreements (the “Option
      Agreements”)
      by and
      between the Company and each Purchaser individually, in substantially the form
      attached hereto as Exhibit
      “B”.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4.  REPRESENTATIONS
      AND WARRANTIES OF EACH PURCHASER.
      Each
      Purchaser hereby makes the following representations and warranties to the
      Company and agrees with the Company that, as of the date of this Agreement
      and
      as of the date of each Closing:

     

    4.1  Authorization;
      Enforceability.
      Such
      Purchaser is duly and validly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or organization as
      set
      forth below such Purchaser’s name on the signature page hereof with full power
      and authority to purchase the Shares and to execute and deliver this Agreement.
      This Agreement constitutes such Purchaser’s valid and legally binding
      obligation, enforceable in accordance with its terms, except as such enforcement
      may be limited by (i) applicable bankruptcy, insolvency, reorganization or
      other
      laws of general application relating to or affecting the enforcement of
      creditors’ rights generally and (ii) general principles of equity.

     

    4.2  Accredited
      Investor.
      Such
      Purchaser is an accredited investor as that term is defined in Rule 501 of
      Regulation D, and is acquiring the Shares solely for its own account as a
      principal and not with a present view to the public resale or distribution
      of
      all or any part thereof, except pursuant to sales that are exempt from the
      registration requirements of the Securities Act and/or sales registered under
      the Securities Act; provided, however, that in making such representation,
      such
      Purchaser does not agree to hold the Shares for any minimum or specific term
      and
      reserves the right to sell, transfer or otherwise dispose of the Shares at
      any
      time in accordance with the provisions of this Agreement and with Federal and
      state securities laws applicable to such sale, transfer or
      disposition.

     

    4.3  Information.
      The
      Company has provided such Purchaser with information regarding the business,
      operations and financial condition of the Company and its Subsidiaries, and
      has
      granted to such Purchaser the opportunity to ask questions of and receive
      answers from representatives of the Company, its officers, directors, employees
      and agents concerning the Company and its Subsidiaries and materials relating
      to
      the terms and conditions of the purchase and sale of the Shares hereunder.
      Neither such information nor any other investigation conducted by such Purchaser
      or any of its representatives shall modify, amend or otherwise affect such
      Purchaser’s right to rely on the Company’s representations and warranties
      contained in this Agreement.

     

    4.4  Limitations
      on Disposition.
      Such
      Purchaser acknowledges that, except as provided in the Registration Rights
      Agreement, the Shares have not been and are not being registered under the
      Securities Act and may not be transferred or resold without registration under
      the Securities Act or unless pursuant to an exemption therefrom.

     

    4.5  Legend.
      Such
      Purchaser understands that the certificates representing the Shares may bear
      at
      issuance a restrictive legend in substantially the following form:

     

    “The
      Shares represented by this certificate have not been registered under the
      Securities Act of 1933, as amended, or the securities laws of any state, and
      may
      not be offered or sold unless a registration statement under the Securities
      Act
      and applicable state securities laws shall have become effective with regard
      thereto, or an exemption from registration under said Securities Act and
      applicable state securities laws is available in connection with such offer
      or
      sale.” 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    4.6  Reliance
      on Exemptions.
      Such
      Purchaser understands that the Shares are being offered and sold to it in
      reliance upon specific exemptions from the registration requirements of United
      States Federal and state securities laws and that the Company is relying upon
      the truth and accuracy of the representations and warranties of such Purchaser
      set forth in this Section 2 in order to determine the availability of such
      exemptions and the eligibility of such Purchaser to acquire the
      Shares.

     

    4.7  Non-Affiliate
      Status; Common Stock Ownership.
      Such
      Purchaser is not an affiliate or an associate (as such terms are defined in
      Rule
      12b-2 promulgated under the Exchange Act) of the Company or of any other
      Purchaser and is not acting in association or concert with any other Purchaser
      in regard to its purchase of Shares or otherwise in regard to the Company.
      Such
      Purchaser’s investment in Shares is not for the purpose of acquiring, directly
      or indirectly, control of, and it has no intent to acquire or exercise control
      of, the Company or to influence the decisions or policies of the Company's
      Board
      of Directors. 

     

    5.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company hereby makes the following representations and warranties to each
      Purchaser and agrees with each Purchaser that, as of the date of this Agreement
      and as of the date of the Closing:

     

    5.1  Organization,
      Good Standing and Qualification.
      Each of
      the Company and its Subsidiaries is duly organized, validly existing and in
      good
      standing under the laws of the jurisdiction of its incorporation or organization
      and has all requisite power and authority to carry on its business as now
      conducted. Each of the Company and its Subsidiaries is duly qualified to
      transact business and is in good standing in each jurisdiction in which the
      failure so to qualify has had or would reasonably be expected to have a Material
      Adverse Effect.

     

    5.2  Authorization;
      Consents.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents, to issue and sell
      the
      Shares to the Purchasers in accordance with the terms hereof. All corporate
      action on the part of the Company necessary for the authorization, execution
      and
      delivery of, and the performance by the Company of its obligations under, the
      Transaction Documents has been taken, and no further consent or authorization
      of
      the Company, its Board of Directors, its stockholders, any governmental agency
      or organization (other than such approval as may be required under the
      Securities Act and applicable state securities laws in respect of the
      Registration Rights Agreement), or any other person or entity is
      required.

     

    5.3  Enforcement.
      Each of
      the Transaction Documents constitutes the valid and legally binding obligation
      of the Company, enforceable in accordance with its terms, except as such
      enforcement may be limited by (i) applicable bankruptcy, insolvency,
      reorganization or other laws of general application relating to or affecting
      the
      enforcement of creditors’ rights generally and (ii) general principles of
      equity. 

     

    5.4  Disclosure
      Documents.
      The
      Company has filed with the Commission reports on Form 8-K on January 13, January
      27, March 3, and May 12, 2005, Form 8-K/A on March 4, 2005, Form 10-QSB on
      May
      13, 2005, Form 8-K on July 6, 2005, and Form 10-QSB on August 15, 2005
      (collectively, the “Disclosure
      Documents”).
      As of
      the date of such filing, the Disclosure Documents did not contain an untrue
      statement of material fact or omit to state a material fact required to be
      stated therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading. As of their respective
      dates, the financial statements of the Company included in the Disclosure
      Documents have been prepared in accordance with generally accepted accounting
      principles consistently applied at the times and during the periods involved.
      

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    5.5  Due
      Authorization; Valid Issuance.
      The
      Shares are duly authorized and, when issued, sold and delivered in accordance
      with the terms hereof, (i) will be duly and validly issued, fully paid and
      non-assessable, and (ii) based in part upon the representations of each
      Purchaser in this Agreement, will be issued, sold and delivered in compliance
      with all applicable Federal and state securities laws. 

     

    5.6  No
      Conflict with Other Instruments.
      Neither
      the Company nor any of its Subsidiaries is in violation of any provisions of
      its
      charter, bylaws or any other governing document or in default (and no event
      has
      occurred which, with notice or lapse of time or both, would constitute a
      default) under any provision of any instrument or contract to which it is a
      party or by which it is bound, which has had or would reasonably be expected
      to
      have a Material Adverse Effect. The (i) execution, delivery and performance
      of
      the Transaction Documents and (ii) consummation of the transactions contemplated
      hereby and thereby (including without limitation, the issuance of the Shares)
      will not result in any such violation or be in conflict with or constitute,
      with
      or without the passage of time and giving of notice, either a default under
      any
      such provision, instrument or contract or an event which results in the creation
      of any encumbrance upon any assets of the Company or of any of its Subsidiaries
      or the triggering of any preemptive or anti-dilution rights or rights of first
      refusal or first offer, or any other rights that would allow or permit the
      holders of the Company’s shares to purchase shares of Common Stock or other
      shares of the Company.

     

    5.7  Financial
      Condition.
      The
      Company and its Subsidiaries’ financial condition on a consolidated basis is, in
      all material respects, as described in the Disclosure Documents, except for
      changes in the ordinary course of business and changes that are not, in the
      aggregate, materially adverse to the consolidated business or financial
      condition of the Company and its Subsidiaries taken as a whole. Except as
      otherwise described in the Disclosure Documents, there has been no material
      adverse change to the Company’s and Subsidiaries’ business, operations,
      properties, financial condition, prospects or results of operations since the
      date of the financial statements contained in the Disclosure
      Documents.

     

    5.8  Disclosure.
      No
      written statement, information, report, representation or warranty made by
      the
      Company in any Transaction Document or furnished to such Purchaser by or on
      behalf of the Company in connection with (i) the Transaction Documents, (ii)
      any
      transaction contemplated hereby or thereby, or (iii) such Purchaser’s due
      diligence investigation of the Company contains any untrue statement of a
      material fact or omits to state any material fact necessary to make the
      statements herein or therein, in light of the circumstances in which made,
      not
      misleading.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    
      	6.  	
              COVENANTS
                OF THE COMPANY.

            

    

     

    6.1  The
      Company agrees with each Purchaser that it will, following the
      Closing:

     

    (a)  subject
      to constraints that may from time to time exist by law, including the provisions
      of the Securities Act and the Exchange Act and the regulations promulgated
      thereunder, cause its management, upon request of any of the Purchasers, to
      conduct quarterly conference calls with the Purchasers to discuss financial
      results and the operations of the Company;

     

    (b)  retain
      research, investor relations professionals to assist in the dissemination of
      the
      Company’s financial results;

     

    (c)  on
      a best
      effort basis, have management conduct marketing trips to the U.S. at least
      once
      a year to meet with both current and potential investors to discuss the
      Company’s current development and future prospects;

     

    (d)  on
      a
      reasonable effort basis, participate in investors conferences in the U.S. when
      the opportunity arises; and

     

    (e)  apply
      to
      list its securities on the NASDAQ Small Cap Market as soon as it becomes
      qualified.

     

    6.2  Use
      of
      Proceeds.
      The
      Company shall use the net proceeds from the sale of the Shares for general
      corporate purposes. The Company expects to use the net proceeds for develop
      and
      manufacture the liner motor used in generator control-box switch servo,
      automated three-dimensional warehouse and logistical line, the allocation were
      as follows:

     

    (a)  $2
      million for expansion of production capacity; 

     

    (b)  $1
      million for research and development; 

     

    (c)  $0.25
      million for the certification process for new products; and 

     

    (d)  the
      balance will be used for general working capital, including the employment
      of
      additional personnel, raw materials, market development and sales.

     

    
      	7.  	
              MISCELLANEOUS.

            

    

     

    7.1  Amendment;
      Waiver.
      Any
      provision of this Agreement may be amended or waived only pursuant to a written
      instrument executed by the Company and each Purchaser. Any amendment or waiver
      affected in accordance with this paragraph shall be binding upon each Purchaser
      and the Company. The failure of any party to exercise any right or remedy under
      this Agreement or otherwise, or the delay by any party in exercising such right
      or remedy, shall not operate as a waiver thereof. 

     

    7.2  Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall be deemed an
      original, and all of which together shall be deemed one and the same instrument.
      This Agreement, once executed by a party, may be delivered to any other party
      hereto by facsimile transmission.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    7.3  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York applicable to contracts made and to be performed entirely
      within the State of New York. 

     

    7.4  Binding
      Effect; Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns. This Agreement is not assignable by
      either party without the prior written consent of the other party.

     

    7.5  Usage.
      For
      purposes of this Agreement, except as otherwise expressly provided:

     

    (a)  all
      pronouns and any variations thereof refer to the masculine, feminine or neuter,
      singular or plural, as the context may require;

     

    (b)  all
      terms
      defined in this Agreement in their singular or plural forms have correlative
      meanings when used herein in their plural or singular forms,
      respectively;

     

    (c)  unless
      otherwise expressly provided, the words “include,” “includes” and “including” do
      not limit the preceding words or terms and shall be deemed to be followed by
      the
      words “without limitation” or “but not limited to,” as applicable;

     

    (d)  all
      accounting terms not otherwise defined in this Agreement have the meaning
      assigned to them in accordance with GAAP;

     

    (e)  the
      words
“herein”, “hereof” and “hereunder” and other words of similar import as used in
      this Agreement refer to the Agreement as a whole and not to any particular
      Article, Section or other subdivision;

     

    (f)  all
      references to “dollars” or “$” are U.S. dollars; and

     

    (g)  all
      references to “this Agreement” or to the “Preamble” or “any “Recital,”
“article,” “Section.,” “Annex,” or “Schedule” in this Agreement are to this
      Agreement itself or to the Preamble, recital, Article, Section, Annex, or
      Schedule to or of this Agreement, unless otherwise indicated.

     

    7.6  Articles
      and Sections.
      All
      references herein to Articles and Sections shall be deemed references to such
      parts of this Agreement, unless the context shall otherwise require. The Article
      and Section headings in this Agreement are for reference only and shall not
      affect the interpretation of this Agreement.

     

    7.7  Interpretation.
      The
      parties acknowledge and agree that (a) each party and its counsel reviewed
      and
      negotiated the terms and provisions of this Agreement and have contributed
      to
      its revision, (b) the rule of construction to the effect that any ambiguities
      are resolved against the drafting party shall not be employed in the
      interpretation of this Agreement, and (c) the terms and provisions of this
      Agreement shall be construed fairly as to all parties, regardless of which
      party
      was generally responsible for the preparation of this Agreement. Any Law defined
      or referred to herein (or in any agreement or instrument that is referred to
      herein) means such Law as, from time to time, may be amended, modified or
      supplemented, including (in the case of statutes) by succession of comparable
      successor statutes. References to a Person also refer to its predecessors and
      permitted successors and assigns.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    7.8  Severability
      of Provisions.
      If any
      provision or any portion of any provision of this Agreement shall be held
      invalid or unenforceable, the remaining portion of such provision and the
      remaining provisions of this Agreement shall not be affected thereby. If the
      application of any provision or any portion of any provision of this Agreement
      to any Person or circumstance shall be held invalid or unenforceable, the
      application of such provision or portion of such provision to Persons or
      circumstances other than those as to which it is held invalid or unenforceable
      shall not be affected thereby.

     

    7.9  No
      Personal Liability.
      Except
      as set forth in Section 3.1 herein, this Agreement (and each agreement,
      certificate and instrument delivered pursuant hereto) shall not create or be
      deemed to create or permit any personal liability or obligation on the part
      of
      any officer, director, employee, agent, representative or investor of any party
      hereto.

     

    7.10  Counterparts.
      This
      Agreement may be executed by the parties hereto in separate counterparts, each
      of which when so executed and delivered shall be an original, but all such
      counterparts together shall constitute one and the same instrument. Each
      counterpart may consist of a number of copies hereof each signed by less than
      all, but together signed by all, of the parties hereto.

     

    
      
         

        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

     

    The
      Company:
      

     

    HARBIN
      ELECTRIC, INC.

    

    

    

    By:
       /s/
      Tian
      Fu  Yang

    
      
        

      

    

    Name: Tian
      Fu
      Yang

    Title: CEO

    

    Purchasers:
      

    

    
      	
              Lake
                Street Fund, L.P.

               

               

              By:/s/ Scott
                W. Hood  

              
                

              

              Name: Scott
                W. Hood

              Title: Investment
                Manager

              President
                FWSM

               

              Number
                of Shares: 533,333

              Purchase
                Price:  $1,599,999

            	
              Fred
                L. Astman & Jean L. Astman JT-WROS

               

               

              By:/s/ Fred
                L. Astman  

              
                

              

              Name: Fred
                L. Astman

               

              By:
                /s/ Jean
                L. Astman 

              
                

              

              Name: Jean
                L. Astman

               

              Number
                of Shares: 200,000

              Purchase
                Price:  $600,000

               

            
	
              Fred
                L. Astman & Jean

               

               

              By:
                /s/ Fred
                L. Astman  

              
                

              

              Name: Fred
                L. Astman

               

              Number
                of Shares: 75,660

              Purchase
                Price:  $226,980

               

            	
              Scott
                Hood

               

               

              By:
                /s/ Scott
                W. Hood  

              
                

              

              Name: Scott
                W. Hood 

               

              Number
                of Shares: 13,333

              Purchase
                Price:  $39,999

            

    

     

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              Howard
                Lu

               

               

              By:
                /s/ Howard
                Lu  

              
                

              

              Name: Howard
                Lu

               

              Number
                of Shares: 13,000

              Purchase
                Price:  $39,000

               

            	
              Shu
                Hua Lu

               

               

              By:/s/ Shu
                Hua Lu  

              
                

              

              Name: Shu
                Hua Lu

               

              Number
                of Shares: 13,000

              Purchase
                Price:  $39,000
                

            
	
              J.
                Peter Selda

               

               

              By:
                /s/ J.
                Peter Selda  

              
                

              

              Name: J.
                Peter Selda 

              IRS
                Rollover

               

              Number
                of Shares: 33,333

              Purchase
                Price:  $99,999

               

            	
              R.
                Gregg Hillman

               

               

              By:
                /s/ R.
                Gregg Hillman  

              
                

              

              Name: R.
                Gregg Hillman

               

              Number
                of Shares: 10,000

              Purchase
                Price:  $30,000

            
	
              Midsouth
                Investor Fund LP

               

               

              By:/s/ Lyman
                O. Heidtke  

              
                

              

              Name: Lyman
                O. Heidtke

              Title: General
                Partner

               

              Number
                of Shares: 266,667

              Purchase
                Price:  $800,000

               

            	
              Lyman
                O. Heidtke

               

               

              By:
                /s/ Lyman
                O. Heidtke  

              
                

              

              Name: Lyman
                O. Heidtke

               

              Number
                of Shares: 66,667

              Purchase
                Price:  $200,000

            
	
              David
                Moy

               

               

              By:/s/ David
                Moy  

              
                

              

              Name: David
                Moy 

               

              Number
                of Shares: 200,000

              Purchase
                Price:  $600,000

            	
              Lighthouse
                Consulting Limited

               

               

              By:
                /s/ Bai
                Ye Feng  

              
                

              

              Name: Bai
                Ye Feng

              Title: Director

               

              Number
                of Shares: 66,667

              Purchase
                Price:  $200,001

               

            

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    
      	
              Anthony
                G. Polak

               

               

              By:/s/ Anthony
                G. Polak 

              
                
Name: Anthony
                G. Polak

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

            	
              Anthony
                G. Polak “S”

               

               

              By:/s/ Anthony
                G. Polak “S”  

              
                

              

              Name: Anthony
                G. Polak “S”

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

               

            
	
              Frederick
                B. Polak “S”

               

               

              By:/s/ Frederick
                B. Polak “S”  

              
                
 Name: Frederick
                B. Polak “S”

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

               

            	
              Margrit
                B. Polak “S”

               

               

              By:/s/ Margrit
                B Polak “S”  

              
                

              

              Name: Margrit
                B. Polak “S”

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

            
	
              Domaco
                Venture Capital Fund

               

               

              By:/s/ Jack
                Polak  

              
                

              

              Name: Jack
                Polak

              Title: General
                Partner

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

            	
              Catharina
                Polak #2 Trust 

               

               

              By:
                /s/ Jack
                Polak   

              
                

              

              Name: Jack
                Polak

              Title: Trustee

               

              By:
                /s/ Catharina
                Polak

              
                

              

              Name: Catharina
                Polak

              Title: Trustee

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

               

            
	
              Ronald
                M. Lazar

               

               

              By:/s/ Ronald
                M. Lazar  

              
                

              

              Name: Ronald
                M. Lazar

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

               

            	
              Dennis
                C. Loeser

               

               

              By:
                /s/ Dennis
                C. Loeser  

              
                

              

              Name: Dennis
                C. Loeser

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

               

            

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

     

    
      	
              Geri
                Investments N.V. 

               

               

              By:/s/ Marinus
                J. Dekker  

              
                

              

              Name: Marinus
                J. Dekker

              Title: Managing
                Partner

               

              Number
                of Shares: 8,334

              Purchase
                Price:  $25,002

            	
              RL
                Capital Partners, L.P. 

               

               

              By:
                /s/ Ronald
                M. Lazar  

              
                

              

              Name: Ronald
                M. Lazar

              Title: Managing
                Member

               

              Number
                of Shares: 33,334

              Purchase
                Price:  $100,002

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