Document:

Exhibit
      10.1

     

    HARBIN
      ELECTRIC, INC.

    No.
      9 Ha
      Ping Xi Lu

    Ha
      Ping
      Lu Ji Zhong

    Qu
      Harbin
      Kai Fa Qu

    Harbin,
      People’s Republic of China 150060

     

    April
      9,
      2007

     

    CONFIDENTIAL

     

    Shelton
      Technology, LLC

    1685
      W.
      Hamlin Road

    Rochester
      Hills, MI 48309

     

    Gentlemen:

     

    1. General.
      This
      letter agreement shall set forth the terms on which Harbin Electric, Inc.
      (“Harbin”) and Shelton Technology, LLC (“Shelton”) have agreed to combine their
      strengths in order to establish a high-tech international company with research
      and development, design and manufacturing capabilities in the area of industrial
      automation controllers (such company shall be referred to herein as the
“Venture”). The parties intend that to combine U.S. strength in technology with
      China’s advantage in low cost manufacturing to develop precision servo motor
      controller products for Harbin’s intelligent motors and provide customized
      industrial automation controllers to OEMs in both the U.S. and
      China.

     

    2. Name.
      The
      name of the Venture will be Advanced Automation Group, LLC. 

     

    3. 
      Structure.
      (a) The
      Venture will be structured as a Delaware limited liability company in which
      Harbin, through its wholly-owned subsidiary, Advanced Electric Motors, Inc.
      (“AEM”), will own a 100% equity interest. Harbin, through AEM shall contribute
      to the Venture or Newco (as defined in Section 4 hereof), $3,000,000, in three
      (3) installments as follows: $1.2 million within ten (10) days of the execution
      of this Agreement (the “Closing Date”), $800,000 on or prior to May 1, 2008 and
      $1.0 million on or prior to March 31, 2009. On the Closing Date, Shelton and
      its
      members and technical team members, shall grant to the Venture an exclusive
      worldwide royalty-free license (the “License”) in the form attached hereto as
Exhibit
      A
      for a
      period beginning on the Closing Date and ending on August 31, 2008 (the “Term”),
      to the designs set forth on Exhibit
      B
      hereto
      as well as all of the technology owned by such persons or entities related
      to
      precision servo motor controllers for industrial automation, including research
      and development, design, manufacturing and testing (the “Licensed Assets”).
      Simultaneously with its execution of the License, Shelton shall execute an
      assignment agreement (the “Assignment”), assigning to the Venture for the Term
      all of Shelton’s existing customer accounts (the “Customer Accounts”). The
      parties agree that all customer accounts of the Venture created during the
      Term
      (the “New Customer Accounts”) shall be the property of the Venture. In
      consideration for the License and the Assignment, Harbin agrees that it shall
      cause the Venture to pay to Shelton 49% of the Profits (as herein after defined)
      realized by the Venture during the Term and the sale of any inventory of
      products existing as of the date of the termination of the Term. For purposes
      of
      this Agreement, the term “Profits” shall mean the Venture’s net income as
      determined in accordance with United States generally accepted accounting
      principles.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)
      Harbin hereby agrees that on or prior to March 31, 2009, it shall cause the
      Venture or Newco to invest $1,000,000 in cash to establish a wholly-owned
      subsidiary in Shanghai, China, which subsidiary will be responsible for the
      manufacturing and testing of the controller products 

     

    4. Transfer
      of Licensed Assets, Customer Accounts and New Customer Accounts
      Harbin
      and Shelton each hereby agree upon no less than 20 days written notice prior
      to
      the end of the Term by Harbin to Shelton, that (i) Harbin or the Venture shall
      be entitled to elect, effective upon the end of the Term to transfer or cause
      all of its business and assets, including the Licensed Assets, the Customer
      Accounts and the New Customer Accounts to be transferred from the Venture to
      a
      newly formed Delaware limited liability company (“Newco”) that is, at such time,
      a wholly-owned subsidiary of Shelton, in consideration for the issuance to
      the
      Venture or AEM of 51% of the outstanding equity of Newco and that (ii)
      simultaneously with and as a condition to the effectiveness of such transfer
      by
      the Venture of the Licensed Assets to Newco and such issuance of equity by
      Newco
      to the Venture or AEM that Shelton shall transfer and assign to Newco all of
      its
      right title and interest in and to the Licensed Assets and the Customer
      Accounts, free and clear of all Liens (as defined in Section 8(e) hereof) in
      consideration for the payment by Newco to Shelton of One Dollar ($1.00). In
      the
      event that Harbin or the Venture do not exercise the transfer option described
      in the preceding sentence, the parties acknowledge and agree that upon the
      expiration of the Term, all right, title and interest in and to the Licensed
      Assets and the Customer Accounts shall revert to Shelton. The parties agree
      that
      it shall be a condition to the transfer and assignment of the Licensed Assets,
      the Customer Accounts and the New Customer Accounts to Newco that Newco shall
      have entered into 3-1/2 year employment agreements with each of Shaotang Chen
      and Xiaogang Luo on substantially similar terms as those employment agreements
      entered into between the Venture and such individuals on the Closing Date,
      as
      described in Section 5 hereof, The parties further agree that in connection
      with
      any such transfer and assignment of the Licensed Assets, the Customer Account
      and the New Customer Accounts to Newco that they each will negotiate in good
      faith with respect to the preparation of an amendment of the operating agreement
      of Newco which agreement shall provide that (w) that Shelton shall be entitled
      to designate no fewer than two of five members of the Board of Directors,
      Management Committee or other governing body of Newco and Harbin shall be
      entitled to designate the remaining members of the Board of Directors,
      Management Committee or other governing body of Newco (x) that Shaotang Chen
      and
      Xiaogang Luo jointly shall be entitled to manage the day to day business
      operations of Newco for a period of at least 3-1/2 years, subject to similar
      restrictions on fundamental business decisions as set forth in Section 5 hereof
      , (y) that Shelton may not dispose of its 49% interest in Newco without the
      prior written consent of Harbin, and (z) that Harbin and Shelton shall each
      agree not to engage in research and development, design and sale of controllers
      that will compete with Newco.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    5. Management
      of the Venture.
      Harbin
      agrees that during the Term that Shaotang Chen and Xiaogang Luo jointly shall
      serve as the manager[s] of the Venture with respect to its day to day business
      operations The Venture shall also have a Board of Managers (the “Board”) which
      shall be comprised of five managers, with three of which shall be appointed
      by
      Harbin and two of which shall be appointed by Shelton. All fundamental business
      decisions with respect to the Venture, which shall include, but not be limited
      to (a) the incurrence of indebtedness to third parties, (b) the acquisition
      or
      disposition of assets, (c) a material change in the business of the Venture,
      (d)
      the approval of the annual budget of the Venture, (e) the making of any
      distributions other than tax distributions, (f) any staffing additions and
      compensation of employees, (f) any capital expenditures or investment in excess
      of $50,000, (g) the hiring of and any change in the Venture’s auditors and (h)
      the establishment of the initial operating policies, procedures and reports
      of
      the Venture, will be made by the Board.

     

    6 Key
      Employees.
      The
      parties hereby agree that on or prior to the Closing Date that the Venture
      will
      have executed eighteen (18) month employment agreements which each of Shaotang
      Chen and Xiaogang Luo , each such agreement to be in substantially the form
      attached hereto as Exhibit
      C (the
      “Employment Agreements”). 

     

    7 Non-Competition.
      In
      order for the Venture to achieve maximum success in its business operations,
      Harbin and Shelton each agree not to engage in research and development, design
      and sale of controllers that will compete with the Venture at any time during
      the Term.

     

    8. Representations
      and Warranties of Shelton
      In order
      to induce to Harbin to enter into this Agreement and to perform its obligations
      hereunder, Shelton hereby represents to Harbin that 

     

    (a)
      It is
      a limited liability company duly organized and validly existing under the laws
      of the State of Michigan and has all power and authority necessary to carry
      on
      its business as it is now being conducted, to enter into this Agreement, the
      License and the Assignment to perform its obligations hereunder and
      thereunder.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (b)
      All
      corporate and other proceedings required to be taken by or on behalf of Shelton
      to authorize it to enter into and carry out this Agreement, the License and
      the
      Assignment have been duly taken, and this Agreement, the License and the
      Assignment each constitute a legal, valid and binding obligation of Shelton,
      enforceable against Shelton in accordance with their respective terms except
      (i)
      as such enforceability may be limited by bankruptcy, insolvency or other similar
      laws affecting the enforcement of creditors’ rights generally and (ii) to the
      extent that equitable remedies, such as injunctive relief or specific
      performance are within the discretion of courts of competent
      jurisdiction.

     

    (c)
      The
      execution and delivery of this Agreement, the License and the Assignment, the
      performance by Shelton of their respective terms, and the consummation of the
      transactions contemplated hereby and thereby will not conflict with, or result
      in any violation of, or default or loss of a benefit under or permit the
      acceleration of any obligation under (i) the organizational documents of Shelton
      (ii) any contract, agreement or commitment of Shelton or (iii) any permit,
      concession, grant franchise, license, judgment, order, decree, statute, law,
      ordinance, rule or regulation applicable to Shelton or to its properties,
      including the Licensed Assets.

     

    (d)
      No
      consent, approval, order or authorization of or registration, declaration or
      filing with, any governmental or regulatory authority is required in connection
      with the execution and delivery of this Agreement, the License or the Assignment
      by Shelton or the consummation by Shelton of the transactions contemplated
      hereby or thereby. 

     

    (e)
      Except for the transfer and purchase option granted by Shelton to Harbin and
      Newco pursuant to Section 4 hereof, Shelton has good and valid title to each
      of
      the Licensed Assets, free and clear of all Liens (as hereinafter defined) and
      there is no claim, litigation, or other proceeding pending or threatened, which
      could impair, limit, diminish or otherwise impact upon Shelton’s right in the
      Licensed Assets or its ability to execute and deliver and perform its
      obligations hereunder or under the License. For purposes of this Agreement,
      the
      term “Liens” shall mean any lien, encumbrance, pledge, option, security
      interest, right of first refusal, mortgage, charge, of any kind (including
      any
      conditional sale agreement) or any subordination arrangement in favor of another
      person.

     

    (f)
      None
      of the Licensed Assets nor any of the elements thereof infringe or violate
      any
      rights of any person or entity.

     

    (g)
      None
      of the Licensed Assets are in the public domain.

     

    (h)
      No
      person is infringing on the rights if Shelton in and to any of the Licensed
      Assets.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    9. Representations
      and Warranties of Harbin
      In order
      to induce to Shelton to enter into this Agreement and to perform its obligations
      hereunder, Harbin hereby represents to Shelton that 

     

    (a)
      It is
      a corporation duly incorporated and validly existing under the laws of the State
      of Nevada and has all corporate power and authority necessary to carry on its
      business as it is now being conducted, to enter into this Agreement, the License
      and each of the Employment Agreements and to perform its obligations hereunder
      and thereunder.

     

    (b)
      All
      corporate and other proceedings required to be taken by or on behalf of Harbin
      to authorize it to enter into and carry out this Agreement, the License and
      each
      of the Employment Agreements have been duly taken, and this Agreement, the
      License and each of the Employment Agreements constitute a legal, valid and
      binding obligation of Harbin, enforceable against Harbin in accordance with
      their respective terms except (i) as such enforceability may be limited by
      bankruptcy, insolvency or other similar laws affecting the enforcement of
      creditors’ rights generally and (ii) to the extent that equitable remedies, such
      as injunctive relief or specific performance are within the discretion of courts
      of competent jurisdiction.

     

    (c)
      The
      execution and delivery of this Agreement, the License and each of the Employment
      Agreements, the performance by Harbin of their respective terms, and the
      consummation of the transactions contemplated hereby and thereby will not
      conflict with, or result in any violation of, or default or loss of a benefit
      under or permit the acceleration of any obligation under (i) the articles of
      incorporation or by-laws of Harbin (ii) any contract, agreement or commitment
      of
      Harbin or (iii) any permit, concession, grant franchise, license, judgment,
      order, decree, statute, law, ordinance, rule or regulation applicable to Harbin
      or to its properties.

     

    (d)
      No
      consent, approval, order or authorization of or registration, declaration or
      filing with, any governmental or regulatory authority is required in connection
      with the execution and delivery of this Agreement, the License and each of
      the
      Employment Agreements by Harbin or the consummation by Harbin of the
      transactions contemplated hereby or thereby. 

     

    10. Conditions.
      The
      consummation of the transactions contemplated by this agreement is conditioned
      on (a) the execution and delivery of the License (b) the execution and delivery
      of the Assignment, (c) the execution and delivery of the Employment Agreements,
      (d) the completion of satisfactory due diligence by Harbin and Shelton and
      (e)
      each of the representations and warranties set forth herein being true and
      correct as of the Closing Date.

     

    11. Expenses.
      Harbin
      and Shelton will each bear their respective expenses incurred in connection
      with
      the negotiation, preparation and consummation of the transactions contemplated
      hereby.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    12. Confidentiality.
      Harbin
      and Shelton each agree to treat as confidential and not to disclose to any
      third
      party (other than such person’s legal and financial advisors) any non-public
      information provided by or on behalf of the other party in connection with
      the
      transactions contemplated hereby.

     

    13 Publicity.
      Neither
      Harbin nor Shelton nor any of their respective affiliates shall issue any press
      release or make any public statements about this transaction without the prior
      consent of the other party; provided,
      however,
      that
      any party hereto may make any disclosure required to be made by it under
      applicable law or by stock exchange regulations if it determines in good faith
      that it is appropriate to do so and gives prior written notice to the other
      party hereto, using reasonable efforts, given any time constraints, to reach
      the
      other party hereto and discuss such disclosure with the other
      party.

     

    14. Governing
      Law
      This
      Agreement shall be governed in accordance with the laws of the State of Delaware
      without regard to the principles of conflict of laws.

     

    15 Assignment 
      Neither
      party may assign its rights or obligations hereunder without the prior written
      consent of the other party, except that Harbin may transfer any of its rights
      or
      obligations hereunder to any affiliate of Harbin without the prior written
      consent of Shelton.

     

    16. Waivers
      and Amendments This
      Agreement may be amended, and the
      terms
      hereof may be waived only by a written instrument signed by both Harbin and
      Shelton. 

     

    17. Counterparts
      This
      Agreement may be executed in counterparts, each of which shall be an original
      and all of which shall together constitute one and the same
      instrument.

     

    18. No
      Agency The
      parties shall act solely as independent contractors and nothing contained herein
      shall be construed as creating an agency, partnership, joint venture, employment
      or other relationship between the parties other than one of independent
      contractors.

     

    19. Entire
      Agreement This
      Agreement, the License and the Employment Agreements constitute the entire
      agreement and understanding between the parties hereto with respect to the
      subject matter hereof and supersede all other prior agreements and
      understandings.

     

    20. Termination
      This
      Agreement may be terminated at any time by Harbin or Shelton upon no less than
      30 days prior written notice in the event of a material breach of this Agreement
      that has not been cured during such 30 day period. Notwithstanding any provision
      to the contrary set forth in the License Agreement and the Employment
      Agreements, upon any termination of this Agreement, all obligations of Harbin,
      Shelton, the Venture, Shaotang Chen and Xiaogang Luo, as applicable, under
      the
      License, the Assignment and each of the Employment Agreements shall
      automatically terminate. 

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    If
      the
      foregoing reflects our agreement, kindly sign and return the duplicate copy
      of
      this letter to us which will constitute our agreement as to the subject matter
      hereof. 

    
      	 	 	 
	 	
              Very
                truly yours,

            
	 	 
	 	
              HARBIN
                ELECTRIC, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Tianfu Yang
	 	
              

              Name:
                Tianfu Yang

              Title:
                Chairman and Chief 

               
                Executive Officer

            

    

     

    Agreed
      and Accepted this 

    9th
      day
      of April, 2007

     

    SHELTON
      TECHNOLOGY, LLC

     

     

    By:
      /s/
      Julie Xie 

    
      

    

    Name:
      Julie Xie

    Title:
      Managing Director

     

     

    By:
      /s/
      Shaotang Chen

    
      
Name:
      Shaotang Chen

     

     

    By:
      /s/
      Xiaogang Luo

    
      

    

    Name:
      Xiaogang Luo

     

    
      
         

      

      
        7EXHIBIT
      10.2

     

    LICENSE
      AGREEMENT

     

    THIS
      AGREEMENT is entered into as of this 9th day of April, 2007 by and among Shelton
      Technology, LLC, a Michigan limited liability company, Shaotang Chen and
      Xiaogang Luo (collectively, "LICENSOR") and Advanced Automation Group, LLC,
      a
      Delaware limited liability company ("LICENSEE").

     

    WITNESSETH:

     

    WHEREAS,
      LICENSOR is the owner of the intellectual property and technology identified
      more fully in Schedule A attached hereto (the "Licensed Property");
      and

     

    WHEREAS,
      LICENSOR has the power and authority to grant to LICENSEE the exclusive,
      worldwide (the “Licensed Territory”), right, privilege and license to use the
      Licensed Property in Licensee’s business, including, without limitation, for the
      purpose of developing, manufacturing and selling products which incorporate
      or
      are otherwise based on the Licensed Property (the "Licensed Products”);
      and

     

    WHEREAS,
      LICENSEE desires to obtain from LICENSOR the exclusive worldwide right,
      privilege and license to use the Licensed Property in Licensee’s business,
      including, without limitation, for the purpose of developing, manufacturing
      and
      selling products which incorporate or are otherwise based on the Licensed
      Property.

     

    NOW,
      THEREFORE, in consideration of the promises and agreements set forth herein,
      the
      parties, each intending to be legally bound hereby, do promise and agree as
      follows:

     

    LICENSE

     

    1. LICENSOR
      hereby grants to LICENSEE for the period beginning on the date hereof and ending
      on August 31, 2008 (the “Term”), an exclusive, worldwide royalty free right and
      license to use the Licensed Property in Licensee’s business, including, without
      limitation, for the purpose of developing, manufacturing, commercializing,
      promoting, advertising and selling products which incorporate or are otherwise
      based on the Licensed Property. The license includes, but is not limited to,
      a
      license under any and all patents and copyrights and any applications therefore
      which have been filed or may be filed in the future with respect to the Licensed
      Property.

     

    2. Subject
      to Section 21 hereof, all rights and title to and interest in any improvement
      or
      enhancement developed or discovered by LICENSEE in connection with the license
      granted under Section 1 above or LICENSEE’S activities hereunder shall be vested
      solely in LICENSOR and shall be deemed to be Licensed Property.

     

    3. The
      foregoing license shall be deemed to be, for purposes of Section 365(n) of
      the
      United States Bankruptcy Code and any foreign equivalent thereof, a license
      of
      rights to “intellectual property” as defined therein. LICENSEE, as licensee of
      such rights, shall have the rights and elections with respect thereto as
      specified in the United States Bankruptcy Code and any foreign equivalent
      thereof. This Agreement shall be deemed to be an “agreement supplemental to” the
      license for purposes of Section 365(n) and any foreign equivalent thereof.
      If a
      bankruptcy proceeding is commenced by or against LICENSOR (or any party
      comprising LICENSOR) and LICENSOR (or a trustee or other party acting on its
      behalf) thereafter rejects this Agreement or fails to perform all of its
      obligations hereunder, then LICENSEE shall be entitled to receive, promptly
      upon
      request therefor, a complete duplicate of (or full access to) any such
      intellectual property and all embodiments thereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    AUDIT

     

    4. LICENSOR
      shall have the right, upon at least five (5) days written notice and no more
      than once per calendar year, to inspect LICENSEE's books and records and all
      other documents and material in the possession of or under the control of
      LICENSEE with respect to the subject matter of this Agreement at the place
      or
      places where such records are normally retained by LICENSEE. LICENSOR shall
      have
      free and full access thereto for such purposes and shall be permitted to be
      able
      to make copies thereof and extracts therefrom.

     

    5. All
      books
      and records relative to LICENSEE's obligations hereunder shall be maintained
      and
      kept accessible and available to LICENSOR for inspection for at least three
      (3)
      years after expiration or termination of this Agreement.

     

    6. In
      the
      event that an investigation of LICENSEE's books and records is made, certain
      confidential and proprietary business information of LICENSEE may necessarily
      be
      made available to the person or persons conducting such investigation. It is
      agreed that such confidential and proprietary business information shall be
      retrained in confidence by LICENSOR and shall not be used by LICENSOR or
      disclosed to any third party, or without the prior express written permission
      of
      LICENSEE unless required by law. It is understood and agreed, however, that
      such
      information may be used in any proceeding based on LICENSEE's breach of any
      of
      its obligations under this Agreement. 

     

    WARRANTIES
      & OBLIGATIONS

     

    7. LICENSOR
      hereby represents that except for the purchase option set forth in Section
      4 of
      the Master Agreement (as defined in Section 43 of this Agreement), it is has
      good and valid title to the Licensed Property, free and clear of all Liens
      (as
      hereinafter defined) and there is no claim, litigation, or other proceeding
      pending or threatened, which could impair, limit, diminish or otherwise impact
      upon LICENSOR’S right in the Licensed Property or its ability to execute and
      deliver and perform its obligations hereunder or under this Agreement. For
      purposes of this Agreement, the term “Liens” shall mean any lien, encumbrance,
      pledge, option, security interest, right of first refusal, mortgage, charge,
      of
      any kind (including any conditional sale agreement) or any subordination
      arrangement in favor of another person.

     

    8. 
      LICENSOR
      further represents and warrants that it has the right and power to grant the
      licenses granted herein and that there are no other agreements with any other
      party in conflict herewith.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    9. LICENSOR
      further represents and warrants that (i) none of the Licensed Property infringes
      any right of any third party (ii) no person is infringing on the rights of
      LICENSOR in and to any of the Licensed Property and (iii) none of the Licensed
      Property is in the public domain..

     

    10. LICENSEE
      agrees that it shall be solely responsible for the manufacture, production,
      sale
      and distribution of any Licensed Products and will bear all related costs
      associated therewith.

     

    NOTICES,
      QUALITY CONTROL & SAMPLES

     

    11. The
      licenses granted hereunder are conditioned upon LICENSEE's full and complete
      compliance with the marking provisions of any applicable trademark, patent
      and
      copyright laws of the United States and other countries in the Licensed
      Territory.

     

    12. The
      Licensed Products, as well as all promotional, packaging and advertising
      material relative thereto, shall include all appropriate legal notices are
      required by LICENSEE.

     

    13. The
      Licensed Products, shall be of a high quality which is at least equal to
      comparable products manufactured and marketed by LICENSEE and in conformity
      with
      a standard sample approved by LICENSOR. 

     

    14. If
      the
      quality of a class of the Licensed Products falls below such a production-run
      quality, as previously approved by LICENSOR, LICENSEE shall use its reasonable
      best efforts to restore such quality.

     

    15. Prior
      to
      the commencement of manufacture and sale of the Licensed Products, LICENSEE
      shall submit to LICENSOR, at no cost to LICENSOR and for approval as to quality,
      samples of all Licensed Products which LICENSEE intends to manufacture and
      sell
      and one (1) complete set of all promotional and advertising material associated
      therewith. Such approval by LICENSOR shall not be unreasonably withheld. Failure
      of LICENSOR to approve such samples within ten (10) working days after receipt
      hereof will be deemed approval. If LICENSOR should disapprove any sample, it
      shall provide specific reasons for such disapproval. Once such samples have
      been
      approved by LICENSOR, LICENSEE shall not materially depart therefrom without
      LICENSOR's prior express written consent, which shall be unreasonably
      withheld.

     

    16. The
      LICENSEE agrees to permit LICENSOR or its representative to inspect the
      facilities where the Licensed Products are being manufactured and
      packaged.

     

    NOTICE

     

    17. Any
      notice required to be given pursuant to this Agreement shall be in writing
      and
      delivered personally to the other designated party at the above stated address
      or mailed by certified or registered mail, return receipt requested or delivered
      by a recognized national overnight courier service. 

     

    18. Either
      party may change the address to which notice is to be sent by written notice
      to
      the other in accordance with the provisions of this paragraph.

     

    
      
        
        

      

      
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    PATENTS,
      TRADEMARKS AND COPYRIGHTS

     

    19. LICENSOR
      may seek, in its own name and at its own expense, appropriate patent, trademark
      or copyright protection for the Licensed Property.

     

    20. In
      the
      event that LICENSEE requests that LICENSOR obtain patent or trademark protection
      for a particular item or in a particular country where LICENSOR had not,
      heretofore, obtained such protection, LICENSOR agrees to take reasonable steps
      to obtain such protection, provided, however, that LICENSEE shall be obligated
      to reimburse LICENSOR for the cost of filing, prosecuting and maintaining
      same.

     

    21. It
      is
      understood and agreed that LICENSOR shall retain all right, title and interest
      in the original Licensed Property as well as in any modifications or
      improvements made to the Licensed Property by LICENSEE; provided, however,
      that
      notwithstanding the foregoing or any other provision set forth in this
      Agreement, LICENSEE shall have and shall retain all right, title and interest
      in
      and to each of the inventory of Licensed Products.

     

    22. The
      parties agree to execute any documents reasonably requested by the other party
      to effect any of the above provisions.

     

    23. LICENSEE
      acknowledges LICENSOR's that the Licensed Property is unique and original to
      LICENSOR and that LICENSOR is the owner thereof. Subject to LICENSEE’s rights
      under Section 4 of the Master Agreement to elect to transfer the Licensed
      Property to a newly formed entity in consideration for the issuance to LICENSEE
      or Advanced Electric Motors, Inc of 51% of the equity of such newly formed
      entity and to elect to cause such newly formed entity to purchase the Licensed
      Property from LICENSOR in consideration for the payment of One Dollar ($1.00),
      LICENSEE shall not, at any time during or after the effective Term of the
      Agreement dispute or contest, directly or indirectly, LICENSOR's exclusive
      right
      and title to the Licensed Property or the validity thereof. 

     

    TERMINATION

     

    24. The
      following termination rights are in addition to the termination rights provided
      elsewhere in the Agreement:

     

    25. Immediate
      Right of Termination. LICENSOR shall have the right to immediately terminate
      this Agreement by giving written notice to LICENSEE in the event that LICENSEE
      does any of the following:

     

    A. files
      a
      petition in bankruptcy or is adjudicated a bankrupt or insolvent, or makes
      an
      assignment for the benefit of creditors, or an arrangement pursuant to any
      bankruptcy law, or if the LICENSEE discontinues its business or a receiver
      is
      appointed for the LICENSEE or for the LICENSEE's business and such receiver
      is
      not discharged within thirty (30) days; or

     

    B. breaches
      any of the provisions of this Agreement relating to the unauthorized assertion
      of rights in the Licensed Property; or

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    C. fails,
      after receipt of written notice from LICENSOR, to immediately discontinue the
      distribution or sale of the Licensed Products or the use of any packaging or
      promotional material which does not contain the requisite legal
      legends.

     

    26. Right
      to
      Terminate on Notice. This Agreement may be terminated by either party upon
      thirty (30) days written notice to the other party in the event of a breach
      of a
      material provision of this Agreement by the other party, provided that, during
      the thirty (30) day period, the breaching party fails to cure such breach.
      In
      addition, LICENSEE shall have the right to terminate this Agreement at any
      time
      on sixty (60) days written notice to LICENSOR. 

     

    POST
      TERMINATION RIGHTS

     

    27. Not
      less
      than thirty (30) days prior to the expiration of this Agreement or immediately
      upon termination thereof, LICENSEE shall provide LICENSOR with a complete
      schedule of all inventory of Licensed Products then on-hand (the
      "Inventory");

     

    28. Upon
      expiration or termination of this Agreement, except for reason of a breach
      of
      LICENSEE'S duty to comply with the quality control or legal notice marking
      requirements, LICENSEE shall be entitled to continue to sell such Inventory.
      Such sales shall be made subject to all of the provisions of this Agreement.
      

     

    29. Upon
      the
      expiration or termination of this Agreement, and except as provided in the
      Master Agreement, all of the rights of LICENSEE under this Agreement shall
      forthwith terminate and immediately revert to LICENSOR and LICENSEE shall
      immediately discontinue all use of the Licensed Property, at no cost whatsoever
      to LICENSOR.

     

    30. Upon
      termination of this Agreement for any reasons whatsoever and subject to the
      terms of the Master Agreement, LICENSEE agrees to immediately return to LICENSOR
      all material relating to the Licensed Property including, but not limited to,
      all art work, color separations, prototypes and the like, as well as any market
      studies or other tests or studies conducted by LICENSEE with respect to the
      Licensed Property, at no cost whatsoever to LICENSOR.

     

    GOOD
      WILL

     

    31. LICENSEE
      recognizes the value of the good will associated with the Licensed Property
      and
      acknowledges that the Licensed Property and all rights therein including the
      good will pertaining thereto, belong exclusively to LICENSOR.

     

    INFRINGEMENTS

     

    32. LICENSEE
      shall have the right, in its discretion, to institute and prosecute lawsuits
      against third persons for infringement of their rights licensed in this
      Agreement. If LICENSEE does not institute an infringement suit within ninety
      (90) days after LICENSOR's written request that it do so, LICENSOR may institute
      and prosecute such lawsuit. Any lawsuit shall be prosecuted solely at the cost
      and expense of the party bringing suit and all sums recovered in any such
      lawsuits, whether by judgment, settlement or otherwise, in excess of the amount
      of reasonable attorneys' fees and other out of pocket expenses of such suit,
      shall be divided equally between the parties. Upon request of the party bringing
      the lawsuit, the other party shall execute all papers, testify on all matters,
      and otherwise cooperate in every way necessary and desirable for the prosecution
      of any such lawsuit. The party bringing suit shall reimburse the other party
      for
      the expenses incurred as a result of such cooperation.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    INDEMNITY

     

    33. LICENSEE
      agrees to defend and indemnify LICENSOR, its officers, directors, agents and
      employees, against all costs, expenses and losses (including reasonable
      attorneys' fees and costs) incurred through claims of third parties against
      LICENSOR, based on the manufacture or sale of the Licensed Products including,
      but not limited to, actions founded on product liability; provided, however,
      that LICENSEE shall not be obligated to defend and indemnify LICENSOR against
      any costs, expenses or losses described in Section 32 of this
      Agreement.

     

    34. LICENSOR
      agrees to defend and indemnify LICENSEE, it officers, directors, agents and
      employees, against all costs, expenses and losses (including reasonable
      attorneys' fees and costs) incurred through claims of third parties against
      LICENSEE challenging the authenticity of the originally submitted Licensed
      Property or LICENSOR’S exclusive ownership of the Licensed Property. This
      indemnity does not cover any modifications or changes made to the Licensed
      Property by LICENSEE.

     

    JURISDICTION

     

    35. This
      Agreement shall be governed in accordance with the laws of the State of New
      York..

     

    DISPUTES

     

    36. All
      disputes under this Agreement shall be resolved by the courts of the State
      of
      New York and the parties all consent to the jurisdiction of such courts, agree
      to accept service of process by mail, and hereby waive and jurisdictional or
      venue defenses otherwise available to it.

     

    FORCE
      MAJEURE

     

    37. It
      is
      understood and agreed that in the event that an act of government, or war
      conditions, or fire, flood or labor trouble in the factory of LICENSEE or in
      the
      factory of those manufacturing parts necessary for the manufacture of the
      Licensed Products, prevents the performance by LICENSEE of the provisions of
      this Agreement, then such non performance by LICENSEE shall not be considered
      as
      grounds for breach of this Agreement and such nonperformance shall be excused
      while the conditions herein prevail and for two (2) months
      thereafter.

     

    AGREEMENT
      BINDING ON SUCCESSORS

     

    38. The
      provisions of the Agreement shall be binding upon and shall inure to the benefit
      of the parties hereto, their heirs, administrators, successors and
      assigns.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    NO
      JOINT VENTURE

     

    39. Nothing
      contained herein shall be construed as a joint venture or shall make one party
      the agent of the other party.

     

    ASSIGNABILITY

     

    40. The
      license granted hereunder is personal to LICENSEE and shall not be assigned
      by
      any act of LICENSEE or by operation of law unless in connection with a transfer
      of substantially all of the assets of LICENSEE or with the consent of
      LICENSOR.

     

    WAIVER

     

    41. No
      waiver
      by either party of any default shall be deemed as a waiver of prior or
      subsequent default of the same or other provisions of this
      Agreement.

     

    SEVERABILITY

     

    42. If
      any
      term, clause or provision hereof is held invalid or unenforceable by a court
      of
      competent jurisdiction, such invalidity shall not affect the validity or
      operation of any other term, clause or provision and such invalid term, clause
      or provision shall be deemed to be severed from the Agreement.

     

    INTEGRATION

     

    43. This
      Agreement and the Agreement dated as of April 9, 2007 by and among Shelton
      Technology LLC, Harbin Electric, Inc, Shaotang Chen and Xiaogang Luo (the
“Master Agreement”) constitute the entire understanding of the parties with
      respect to the subject matter hereof, and supersede all prior agreements among
      the parties. In the event of any conflict between the terms of this Agreement
      and the terms of the Master Agreement, the terms of the Master Agreement shall
      control. This Agreement may not be modified or amended except in writing signed
      by the parties hereto. 

    
      
        
        

      

      
        7

        
          

        

      

       

    

     

    IN
      WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
      have
      each caused to be affixed hereto its or his/her hand and seal the day
      indicated.

    
      	 	 	 	 
	
              SHELTON
                TECHNOLOGY, LLC

            	 	 	 
	
               

               

            	 	 	 
	
              By:
                /s/ Julie
                Xie

            	 	 	
            
	
              
                

              

              Name:
                Julie
                Xie 
                Title:
                  Managing
                  Director

                Date:
                  April
                  9, 2007

              

            	 	 	
            

    

     

    
      	 	 	 	 
	
              
                /s/
                  Shaotang Chen

              

            	 	 	
            
	
              

              
                Name:
                  Shaotang Chen

              

            	 	 	
            

    

     

    
      	 	 	 	 
	
              
                
                  /s/
                    Xiaogang Luo

                

              

            	 	 	
            
	
              

              
                
                  Name:
                    Xiaogang Luo

                

              

            	 	 	
            

    

     

    
      	 	 	 	 
	
              
                ADVANCED
                  AUTOMATION GROUP, LLC

              

            	 	 	 
	
               

               

            	 	 	 
	
              
                By:
                  /s/
                  Tianfu Yang

              

            	 	 	
            
	
              
                

              

              
                Name:
                  Tianfu Yang

                Title:
                  Chairman
                  and Chief Executive Officer

                Date:
                  April
                  9, 2007

              

            	 	 	
            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A

     

    The
      following shall constitute the Licensed Property:

     

    All
      patents, copyrights, trademarks, processes, formulations, trade secrets, methods
      of analysis, research and development, testing, designs, techniques, data,
      plans, specifications, drawings, know-how, operations experience and procedures,
      special knowledge of Licensor and its employees, sales literature, customer
      manuals, shop manuals, warranties, and other information related to precision
      servo motor controllers for industrial automation, whether patented or
      unpatented, copyrighted or uncopyrighted, trademarked or untrademarked, that
      is
      currently owned, used, or controlled by Licensor or any affiliate of Licensor
      or, during the Term hereof, shall be developed, owned, used, or controlled
      by
      Licensor or any affiliate of Licensor. 

     

    
      
        
        

      

      
        9

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