NONCOMPETITION COVENANT AND AGREEMENT
EXECUTION
VERSION
NONCOMPETITION
COVENANT AND AGREEMENT
THIS
NONCOMPETITION COVENANT AND AGREEMENT (this “Agreement”)
is
made and entered into as of this September 28, 2007, by ▇▇. ▇▇▇▇ Tianzhou (PRC
ID No. 422429195608137951)
and Mr.
▇▇▇▇▇ ▇▇, each an individual residing in the city of Qingdao, in Shandong
Province in the People’s Republic of China (the “PRC”),
(PRC
ID No.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇)
(“Executive”)
for
the benefit of the parties listed in Schedule
I
attached
hereto (the “Purchasers”).
RECITALS
WHEREAS,
Executive serves as the [Chief Executive Officer]1 [Chairman
of the Board]2
of
Sinoenergy Corporation (the “Company”),
a
company established and existing under the laws of the State of Nevada, the
United States;
WHEREAS,
Executive is also a direct or indirect shareholder of the Company;
WHEREAS,
pursuant to the notes purchase agreements (the “Purchase
Agreements”)
dated
of even date herewith among the Company, the wholly-owned subsidiaries of the
Company and the Purchasers respectively, and other related documents pertaining
to such purchase (collectively, the “Transaction
Documents”),
the
Company shall issue and sell to Purchasers, and Purchasers shall purchase an
aggregate of US$16,000,000 of the Company’s 12% Guaranteed Senior Notes due 2012
(the “Senior
Notes”),
and
an aggregate of US$14,000,000 of the Company’s 3.0% Guaranteed Senior
Convertible Notes due 2012 (the “Convertible
Notes”
and,
together with the Senior Notes, the “Notes”)
representing the right to purchase a certain number of the Company’s common
stock;
WHEREAS,
to induce the Purchasers to consummate the transactions under the Transaction
Documents and to preserve for the Purchasers the valuable rights procured by
Purchasers pursuant to the Transaction Documents related to the transaction
as
contemplated thereunder, the Executive agreed to certain covenants to be made
by
Executive for the benefit of the Purchasers regarding certain future activities
and actions by Executive;
1
▇▇ ▇▇▇▇▇
1
Tianzhou
Deng
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual agreements contained herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, and in accordance with the General
Principles of Civil Law of the PRC,
Contract
Law of the PRC,
and
other applicable laws and regulations, 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 “Agreement”
is
defined in the Preamble.
1.2 “Business”
shall
mean the design, manufacture and marketing of non-standard pressurized
containers for compressed natural gas (“CNG”) storage and transportation
products; the design, manufacture and marketing of CNG vehicle fuel conversion
equipment; construction services for CNG filling stations; and operation of
CNG
filling stations.
1.3 “Company”
is
defined in the Recitals.
1.4 “Company
Affiliate”
shall
mean any entity engaged in the Business which is controlled, directly or
indirectly, by the Company (including without limitation the Group Companies
as
defined under the Purchase Agreements).
1.5 “Competitive
Business”
shall
mean any business that (i) is in the Business and (ii) competes, directly or
indirectly, with the Company or any Company Affiliate.
1.6 “Executive”
is
defined in the Preamble.
1.7 “Notes”
is
defined in the Recitals.
1.8 “PRC”
is
defined in the Preamble.
1.9 “Purchasers”
is
defined in the Preamble.
1.10 “Term”
is
defined in Section
2.1.
1.11 “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
are
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.
1.12 “Transaction
Documents”
is
defined in the Recitals.
1.13 “Work
Product”
shall
mean all intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable ideas or 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 Executive,
or delivered by Executive to the Company at any time during the term of
Executive’s employment with the Company.
2
Section
2. Covenants.
2.1 Noncompetition
and Nonsolicitation.
During
the period commencing as of the date hereof and until the earlier of (i) all
of
the Notes cease to remain outstanding and (ii) one year after the Purchasers
cease to beneficially own, directly or indirectly, any securities of the Company
(such period, the “Term”),
Executive hereby agrees that Executive will
not,
directly or indirectly, engage in, or have any interest in, any person, firm,
corporation, or business (whether as an executive, officer, director, agent,
security holder, employee, consultant, investor or similar position) that
engages in or render services to a Competitive Business, or otherwise interfere
with the business of the Company or Company Affiliates, including without
limitation:
(a) either
on
his own behalf or on behalf of any other person, solicit business similar to
the
Business from any customer, supplier, distributor of, or a person in a similar
commercial relationship with, the Company or Company Affiliates; and
(b) either
on
his 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 Company Affiliates, or in any manner
induce any employee of the Company or Company Affiliates to terminate his or
her
employment therewith.
Notwithstanding
the foregoing paragraphs of this Section
2.1:
(i) Executive
may own, directly or indirectly, as an investor, securities of any corporation
(the stock of which is publicly traded) engaging in a Competitive Business,
so
long as Executive’s aggregate holdings in each such corporation shall not
constitute more than five percent (5%) of such corporation’s voting
stock;
(ii) Executive
represents that the entities identified in Schedule
II
represent the pre-existing relationships disclosed by the Company pursuant
to
the Purchase Agreement which form part of the Transaction Documents and do
not
engage in a Competitive Business and for the foregoing reason, the Executive
may
continue his involvement as a shareholder, officer or director of such entities
so long as such entities do not engage in a Competitive Business during such
involvement; and
(iii) Executive
may serve as a shareholder, director or officer of any entity that is not
engaged in a Competitive Business.
3
2.2 Confidentiality
and Other Covenants.
Executive agrees that:
(a) he
shall
keep confidential any information, including Trade Secrets, relating to the
Company, Company Affiliates, 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 to a third party who has rightfully obtained such Trade
Secrets without breach of any confidentiality obligation);
(b) all
Work
Product of Executive conceived (whether solely or jointly with others) within
the scope of his employment with the Company belongs to the Company and any
and
all of his rights to such Work Product, to the extent not yet assigned, are
hereby assigned to the Company;
(c) upon
the
termination of his employment with the Company, at the request of the Company,
he shall return to the Company all of the Company’s proprietary items in his
possession or under his control and shall not retain any copies or other
physical embodiment of any of such items; and
(d) upon
the
termination of his employment with the Company, he shall not hold himself out
as
an employee, agent or representative of the Company.
2.3 Termination.
The
parties agree that the Term shall terminate, and this Agreement shall be deemed
terminated and of no further effect, without necessity of further action by
Executive or the Purchasers, upon the expiration of the Term.
2.4 Specific
Enforcement.
Upon a
breach by Executive of Section
2.1
or
2.2,
in
addition to such damages as the Purchasers can show they have sustained,
directly or indirectly, by reason of said breach and in addition to any other
remedies to which Purchasers may be entitled under the laws of the PRC, the
Purchasers shall be entitled to injunctive relief against Executive if such
relief is applicable and available, as monetary compensation alone would be
inadequate and insufficient. Nothing in this Agreement shall be construed as
limiting the Purchasers’ remedies in any way.
Section
3. Miscellaneous.
3.1 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, in each case, to the extent permitted by applicable law, and
the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of
such that may be hereafter declared invalid, illegal, void or unenforceable,
to
the extent permitted by applicable law.
4
3.2 Counterparts.
This
may be executed in counterparts, each of which shall be deemed to be an
original, and all such counterparts together shall constitute but one and the
same instrument.
3.3 Governing
Law; Arbitrations.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
PEOPLE’S REPUBLIC OF CHINA.
Any
dispute, controversy or claim arising out of or in connection with this
Agreement shall be settled through negotiation between the parties; if the
parties fail to resolve such dispute within sixty (60) days after the date
such
negotiation was first requested in writing by either party, it shall be settled
by arbitration in accordance with the Arbitration Rules of the Chinese
International Economic and Trade Arbitration Commission (“CIETAC”).
In
the case of any conflict between the terms of this Agreement and the CIETAC
Arbitration Rules, the terms of this Agreement shall prevail. The institution
administering the arbitration shall be CIETAC Beijing Headquarters. The seat
of
arbitration shall be Beijing. The arbitral tribunal shall consist of three
arbitrators, with one appointed by the Executive, one appointed by the
Purchasers and a third neutral arbitrator to be appointed by the other two
party-appointed arbitrators, who shall not be a citizen of the PRC and who
shall
act as the chairman of the tribunal. The parties agree to the appointment of
arbitrators who are not on CIETAC’s Panel of Arbitrators. If either party fails
to appoint an arbitrator within the time specified in the CIETAC Arbitration
Rules, or if the two party-appointed arbitrators fail to jointly appoint the
third neutral arbitrator within the time specified in the CIETAC Arbitration
Rules, the Chairman of CIETAC shall make such an appointment. The arbitration
shall be conducted on a confidential basis. All arbitration proceedings shall
be
held in the Chinese language (with an English translator available to any party
who so requests). Any arbitration award made by the arbitration panel shall
be
final and binding on the parties and may be entered and enforced in any court
of
competent jurisdiction. The parties shall submit to the jurisdiction of any
such
court for purposes of the enforcement of any such award. Notwithstanding the
foregoing agreement to arbitrate, the parties expressly reserve the right to
seek provisional relief from any court of competent jurisdiction to preserve
their respective rights pending arbitration.
3.4 Assignment.
Executive agrees that this Agreement shall inure to the benefits of all holders
of the Notes, whether or not the Purchasers.
3.5 Notice.
Any
notices to be given hereunder by either party to the other may be effectuated
either by personal delivery in writing or by mail, postage prepaid, with return
receipt requested. Notices shall be addressed to the parties as
follows:
5
If
to
the Purchasers:
The
addresses of the Purchasers as indicated in Schedule
I
If
to
Executive:
Mr.
[▇▇
▇▇▇▇▇] [Tianzhou Deng]
Address:
Sinoenergy
Corporation
1603-1604,
▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ District,
Beijing
China, 100107
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 Third
Party Beneficiary Rights.
This
Agreement has been made and is made solely for the benefit of, and shall be
binding upon, the Purchasers (and their respective successors and assigns,
including the holders of the Notes) and Executive, and no other person shall
acquire or have any rights under or by virtue of this Agreement.
3.7 Attorney’s
Fees.
If any
party shall bring a procedure to enforce this Agreement, unless otherwise
decided by the arbitration tribunal, the prevailing party shall be entitled
to
recover the reasonable attorneys’ fees and costs incurred by such party from the
unsuccessful party.
[signature
page follows]
6
IN
WITNESS WHEREOF, the parties hereto have executed this Noncompetition Covenant
and Agreement as of the date first set forth above.
EXECUTIVE:
/s/
DENG Tianzhou
▇▇.
▇▇▇▇
Tianzhou
[SIGNATURE
PAGE TO NONCOMPETITION COVENANT AND
AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have executed this Noncompetition Covenant
and Agreement as of the date first set forth above.
EXECUTIVE:
/s/
▇▇▇▇▇ ▇▇
Mr.
▇▇▇▇▇
▇▇
[SIGNATURE
PAGE TO NONCOMPETITION COVENANT AND AGREEMENT]
Accepted
by:
PURCHASERS:
ABAX
LOTUS LTD.
By:
/s/ Yang
Xiangdong____________________
Name:
Title:
CCIF
PETROL LTD.
By:
/s/
▇▇▇▇▇▇
Lo________________
Name:
Title: