NON-COMPETITION AGREEMENT
THIS
NON-COMPETITION AGREEMENT (this “Agreement”)
is
made and entered into as of June 1, 2007, by and among Xx. Xxxx You-Bin, an
individual residing in the People’s Republic of China (“PRC”)
(the
“Executive”),
and
American Dairy, Inc., a Utah corporation (the “Company”).
RECITALS
WHEREAS,
the Executive serves as the Chief Executive Officer, President and the Chairman
of the Board of Directors of the
Company;
WHEREAS,
the Executive is a shareholder of the Company, directly owning 8,881,135
shares
of
common stock of the Company as of the date hereof;
WHEREAS,
pursuant to an amended and restated notes purchase agreement dated as of June
1,
2007 between the Company, the Executive, Citadel Equity Fund Ltd. (the
“Purchaser”)
and
the other parties thereto, and other related documents pertaining thereto,
the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase,
up to US$80,000,000 guaranteed senior secured convertible notes due 2012 of
the
Company to be issued pursuant to that certain Indenture dated as of the date
hereof by and among the Company, The Bank of New York, as trustee, and the
other
parties thereto (the “Notes”
and
together with the other documents referred to in this paragraph and this
Agreement, the “Transaction
Documents”);
and
WHEREAS,
it
is a condition to the closing of the issuance and sale of the Notes under the
Notes Purchase Agreement that the parties hereto shall have executed this
Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual agreements contained herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section
1. Definitions. Capitalized
terms used in this Agreement shall have the meanings set forth
below.
1.1 Affiliate”
shall
refer to: (1) any Person directly or indirectly controlling, controlled by
or
under common control with another Person, (2) any Person owning or controlling
50% or more of the outstanding voting securities of such other Person, (3)
any
officer, director or partner of such Person, or (4)
a
trust for the benefit of such Person referred to in the foregoing clause (2)
of
this definition
1.2 “Business”
shall
mean the business of processing, manufacturing, marketing and/or distributing
of
soybean powder, walnut powder, rice cereal, milk powder, and other dairy and
related food products in the PRC or any other country, including any other
activities related thereto.
1.3 “Company
Affiliate”
shall
mean any entity engaged in the Business which is controlled by or under common
control with the Company or the Executive.
1.4 “Competitive
Business”
shall
mean any business that (1) currently competes with or is reasonably likely
to
compete with the Business in the future or (2) is engaged in an undertaking
or
enterprise which is substantially similar to the Business (whether in the United
States, the PRC or any other country).
1.5 “Person”
means
any individual, corporation, company (including any limited liability company),
association, partnership, joint venture, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity.
1.6 “Trade
Secret”
shall
mean any information, including, but not limited to, technical or nontechnical
data, formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans, actual
or
future services, or lists of actual or potential customers or suppliers that
(1)
derive economic value, actual or potential, from not being generally known
to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from their disclosure or use, and (2) are the subject
of
efforts that are reasonable under the circumstances to maintain their
secrecy.
1.7 “Work
Product”
shall
mean all intellectual property rights, including all Trade Secrets, United
States, PRC and international copyrights, patentable inventions, discoveries
and
improvements, and other intellectual property rights, in any documentation,
programming, technology, or other work that relates to the business and
interests of the Company and that was or is conceived or developed by the
Executive, or delivered by the Executive to the Company at any time during
the
term of the Executive’s employment with the Company.
Section
2. Covenants.
2.1 Noncompetition
and Nonsolicitation.
During
the Term (as defined in Section 2.4), the Executive hereby agrees that the
Executive will not, directly or indirectly, engage in, or have any interest
in,
any person, firm, corporation, undertaking or business (whether as an executive,
officer, director, employee, agent, security holder, consultant, investor or
similar position) that engages in a Competitive Business. In addition, during
the Term, the Executive agrees that he will not:
(a)
either
on
the Executive’s own behalf or on behalf of any other person, solicit Competitive
Business from any customer, supplier, distributor of, or a person in a similar
commercial relationship with, the Company or the Company
Affiliates;
(b)
either
on
the Executive’s own behalf or on behalf of any other person, solicit, employ or
otherwise engage as an employee, independent contractor, or otherwise any person
who is and was, at any time during one year prior to such solicitation,
employment or engagement, an employee of the Company or any Company Affiliate,
or in any manner induce any employee of the Company or any Company Affiliate
to
terminate his or her employment therewith (except, in each case, as a result
of
general solicitations for employment not directed specifically at employees
of
the Company or any Company Affiliate); or
(c)
otherwise
materially and adversely interfere with the Business of the Company or any
Company Affiliate.
Notwithstanding
the foregoing paragraphs of this Section 2.1:
(i)
the
Executive may own, as an investor, holdings as part of a portfolio investment
through mutual funds or other funds pooling investments in different
corporations (the stock of which is publicly traded) some of which may be
engaging in a Competitive Business, in each case when any and all the investment
and voting decisions with respect to such voting stock are made by an
unaffiliated third party fund manager; and
(ii) the
Executive may serve as a shareholder, director, employee or officer of any
entity that is not engaged in a Competitive Business.
2.2 Continued
Employment.
The
Executive agrees that during the Term, (a) except in the event of termination
of
the Executive’s employment with the Company for reasons other than voluntary
resignation by the Executive, the Executive shall continue to serve as the
Chief
Executive Officer, President and the Chairman of the Board of Directors of
the
Company; and (b) the Executive shall not voluntarily resign as a director of
the
Company.
2.3 Confidentiality
and Other Covenants.
The
Executive agrees that:
(a)
the
Executive shall keep confidential any information, including Trade Secrets,
relating to the Company, any Company Affiliate and the Business (unless such
disclosure is permitted in writing by the Company, required under law or by
order of any governmental or regulatory authority, or relates to information
already in the public domain, or is rightfully obtained from a third party
without breach of any confidentiality obligation);
(b)
all
Work
Product of the Executive conceived (whether solely or jointly with others)
within the scope of the Executive’s employment with the Company belongs to the
Company and any and all of the Executive’s rights to such Work Product, to the
extent not yet assigned, are hereby assigned to the Company;
(c) upon
the
termination of the Executive’s employment with the Company, at the request of
the Company, the Executive shall return to the Company all of the Company’s
proprietary items in the Executive’s possession or under the Executive’s control
and shall not retain any copies or other physical embodiment of any of such
items; and
(d)
upon
the
termination of the Executive’s employment with the Company, the Executive shall
not hold the Executive out as an employee, agent or representative of the
Company.
2.4 Term.
The
parties agree that the term of this Agreement (the “Term”)
shall
be from the date hereof until June 1, 2012.
2.5 Specific
Enforcement.
Upon a
breach by the Executive of Section 2.1, 2.2 or 2.3, in addition to such
damages as the Company may demonstrate they have sustained, directly or
indirectly, by reason of said breach, the Company shall be entitled to
injunctive relief against the Executive if such relief is applicable and
available, as a remedy at law would be inadequate and insufficient. Nothing
in
this Agreement shall be construed as limiting the Company’s remedies or rights
in any way.
Section
3. Miscellaneous.
3.1 Severability. In
the event that a court of competent jurisdiction concludes that the scope of
the
covenants contained herein is unenforceable, the parties agree to be bound
by
those restrictions which the court determines in fact to be enforceable under
the circumstances. Any other provision hereof prohibited by, or unlawful or
unenforceable under, any applicable law of any jurisdiction shall as to such
jurisdiction and to such extent be ineffective, without affecting any other
provision of this Agreement or its effectiveness under any other laws, to the
extent permitted by applicable law. To the full extent, however, that any
provision of such applicable law may be waived, it is hereby waived, such that
this Agreement shall be deemed to be a valid and binding agreement enforceable
in accordance with its terms.
3.2 Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original, and all such counterparts together shall constitute one and the
same instrument.
3.3 Governing
Law; Arbitration.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York. Any controversy or claim arising out of or relating to this
Agreement, or any breach of this Agreement, shall be initiated, maintained
and
finally determined by binding arbitration under the rules of conciliation and
arbitration of the International Chamber of Commerce (the “ICC”).
The arbitral tribunal shall be appointed within thirty (30) days of the
notice of dispute, and shall consist of three arbitrators appointed as follows:
one arbitrator shall be appointed by the Executive, one arbitrator shall be
appointed by the Company, and the third arbitrator shall be appointed jointly
by
such two arbitrators; provided,
however,
that if
the two arbitrators shall be unable to select the third arbitrator within such
thirty (30)-day period, such third arbitrator shall be chosen by the
International Court of Arbitration of the ICC.
The
place of arbitration shall be in Hong Kong SAR, PRC. The arbitration shall
be
conducted in English. The arbitrators shall be experienced and have knowledge
in
the subject matter of the dispute. Judgment upon any award rendered may be
entered in any court having jurisdiction thereof, or application may be made
to
such court for a judicial acceptance of the award and an order of enforcement,
as the case may be. Any award pursuant to such proceeding shall be granted
in U.S. Dollars. The arbitration awards shall be non-appealable, final, binding
and conclusive upon parties. Each of the parties hereby irrevocably agrees
that
any service of process made with respect to a dispute under this Agreement
may
be made pursuant to the notice procedures set forth in this
Agreement.
3.4 Third
Party Beneficiary; Successors and Assigns.
The
Purchaser is an intended third party beneficiary of the provisions of this
Agreement. The provisions of this Agreement shall inure to the benefit of,
and
shall be binding upon, the successors and assigns of the parties hereto and
the
Purchaser; it being understood that the Purchaser shall be permitted to assign
its rights under this Agreement to any Affiliate of the Purchaser who purchases
the Notes or the common shares into which the Notes may be converted,
provided
that
such Affiliate shall be subject to the same terms as those set forth in this
Agreement and provided
that
notice of such assignment is given to the Executive. The Executive shall not
be
entitled to assign or otherwise transfer any of their rights or obligations
under this Agreement or any other party.
3.5 Notice.
Any
notices to be given hereunder by either party to the other shall be in writing
and may be effectuated either by personal delivery, by facsimile or by mail,
postage prepaid, with return receipt requested. Notices shall be addressed
to
the parties as follows:
If
to
the Company:
Star
City International Building
Xx.
00 Xxxxxxxxxxx Xxxx, X-00xx
Xxxxx
Xxxxxxxx
Xxxxxxxx, Xxxxxxx
People’x
Xxxxxxxx xx Xxxxx 000000
Attention:
Xx. Xxxx You-Bin
with
a
copy to:
Xxxxxxx
Xxxx LLP
0000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
(000)
000-0000
Attention:
Xxxxxxx X. Xxxxx, Esq.
If
to
the Executive:
Star
City International Building
Xx.
00 Xxxxxxxxxxx Xxxx, X-00xx
Xxxxx
Xxxxxxxx
Xxxxxxxx, Xxxxxxx
People’x
Xxxxxxxx xx Xxxxx 000000
Fax:
(00)
00 0000 0000
or
to
such other address as either the parties may designate by written notice to
each
other. Notices delivered personally shall be deemed duly given on the date
of
actual receipt; mailed notices shall be deemed duly given as of the fifth day
after the date so mailed. Notices hereunder may be delivered by electronic
facsimile transmission (fax) if confirmation by sender is made within three
business days by mail or personal delivery.
3.6 Attorney’s
Fees.
If any
party shall bring an action to enforce this Agreement, the prevailing party
shall be entitled to recover the reasonable attorneys’ fees and costs incurred
by such party from the unsuccessful party.
[Signature page(s) to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Non-Competition Agreement
as of the date first set forth above.
| COMPANY: | ||
| AMERICAN DAIRY, INC. | ||
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| By: | ||
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