Document:

EXHIBIT
      10.15

     

    NONCOMPETITION
      COVENANT AND AGREEMENT

     

    THIS
      NONCOMPETITION COVENANT AND AGREEMENT (the “Agreement”) is made and entered into
      as of this 30th day of August, 2006, by and between Citadel Equity Fund Ltd.,
      with addresses at c/o Citadel Investment Group (Hong Kong) Limited, Chater
      House, 18th
      Floor, 8
      Connaught Road, Central, Hong Kong, and Merrill Lynch International, with
      addresses at 17/F ICBC Tower, 3 Garden Road, Central, Hong Kong (collectively,
      the “Purchasers”), and Yang Tianfu, an individual residing in the People’s
      Republic of China (“PRC”), (PRC ID No. 230107610622081)
      (“Executive”).

     

    RECITALS

     

    WHEREAS,
      Executive serves as the Chief Executive Officer and the Chairman of the
      Company;

     

    WHEREAS,
      Executive is also the majority shareholder of the Company;

     

    WHEREAS,
      pursuant to a purchase agreement dated of even date herewith between the
      Company, Advanced Electric Motors, Inc., and the Purchasers, 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 50,000 units consisting of units of notes
      (“Notes”) and warrants, for an aggregate consideration of
      US$50,000,000;

     

    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, Executive agreed to certain
      covenants to be made by Executive for the benefit of the Purchasers regarding
      certain future activities and actions by Executive;

     

    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  “Business”
      shall mean the business of designing, manufacturing, servicing and marketing
      linear motors and accessories, linear motor drive systems and accessories,
      high
      efficiency motors and accessories, and other special motors and
      accessories.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2  “Company
      Affiliate” shall mean any entity engaged in the Business which is controlled by
      or under common control with the Company or Executive. 

     

    1.3  “Competitive
      Business” shall mean any business that competes with the Business.

     

    1.4  “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.

     

    1.5  “Work
      Product” shall mean all intellectual property rights, including all Trade
      Secrets, U.S. 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 Executive,
      or delivered by Executive to the Company at any time during the term of
      Executive’s employment with the Company.

     

    Section
      2.  Covenants.

     

    2.1  Noncompetition
      and Nonsolicitation.
      During
      the period commencing as of the date hereof and for so long as any of the Notes
      remain outstanding (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, consultant, investor or similar position)
      that
      engages in 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;

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (ii)
      Executive may continue his involvement as a shareholder, officer and/or director
      of the entities as set forth in Schedule
      A,
      which
      represents the pre-existing relationships disclosed by the Company in the
      Disclosure Schedules to the Purchase Agreement which form part of the
      Transaction Documents; and

     

    (iii)
      Executive may serve as a shareholder, director or officer of any entity that
      is
      not engaged in a Competitive Business.

     

    2.2  Continued
      Employment.
      Executive agrees that during the Term, (a) except in the event of an involuntary
      termination, he shall continue to serve as the Chief Executive Officer or a
      senior officer of the Company; and (b) he shall not voluntarily resign as a
      director of the Company.

     

    2.3  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 is rightfully obtained from a third party 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. 

     

    2.4  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 earlier to occur of (i) the payment in
      full of the Notes on the latest maturity date of the Notes, which shall be
      August 30, 2012; or (ii) the redemption or repurchase of the Notes in full
      by
      the Company.

     

    2.5  Specific
      Enforcement.
      Upon a
      breach by Executive of Section 2.1 or 2.3, in addition to such damages as
      the Purchasers can show they have sustained, directly or indirectly, by reason
      of said breach, the Purchasers shall be entitled to injunctive relief against
      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 Purchasers’ remedies in any way.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

    Section
      3.  Miscellaneous.

     

    3.1  Severability.  In
      the event a court of competent jurisdiction should conclude that the scope
      of
      the covenants contained herein is unenforceable, the parties agree to be bound
      by those restrictions which the court should ultimately determine 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 full extent, however, that any provision of such applicable law may be
      waived, it is hereby waived, to the end that this Agreement be deemed to be
      a
      valid and binding agreement enforceable in accordance with its
      terms.

     

    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; Arbitration.
      This
      Agreement shall be governed by the laws of the PRC. All
      disputes arising out of or in connection with this Agreement shall be finally
      settled under the Rules of Arbitration of the International Chamber of Commerce
      by three arbitrators appointed as follows: one arbitrator shall be appointed
      by
      the Purchasers, one arbitrator shall be appointed by Executive, and the third
      arbitrator shall be appointed jointly by the two arbitrators appointed by the
      parties.  The place of arbitration shall be in Hong Kong. The arbitration
      shall be conducted in English.  The arbitration awards shall be final and
      binding upon the parties. 

     

    3.4  Successors
      and Assigns.
      Executive agrees that this Agreement may be assigned by the Purchasers upon
      the
      sale, transfer or reorganization of the Purchasers. This Agreement shall be
      binding upon and inure to the benefit of the successors and assigns of the
      Purchasers. This Agreement shall not be assignable by Executive.

     

    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:

     

    If
      to
      the Purchasers:

     

    Merrill
      Lynch International

    17/F
      ICBC
      Tower

    3
      Garden
      Road

    Central,
      Hong Kong

    

    Citadel
      Equity Fund Ltd.

    c/o
      Citadel Investment Group (Hong Kong) Limited

    Chater
      House, 18th
      Floor

    8
      Connaught Road

    Central,
      Hong Kong

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    If
      to
      Executive:

     

    Yang
      Tianfu

    c/o
      Harbin Tech Full Electric Co. Ltd.

    No.
      9 Ha
      Ping Xi Lu, Ha Ping Lu Ji Zhong Qu

    Harbin
      Kai Fa Qu

    Harbin
      150060

    PRC

     

    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 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 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 follows] 

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Noncompetition Covenant
      and Agreement as of the date first set forth above.

     

    
      	 	 	 
	 	
              PURCHASERS:

            
	 	 
	 	
              CITADEL
                EQUITY FUND LTD.

            
	 
 	 
 	 
 
	
            	By:  	Citadel
              Limited Partnership, Portfolio Manager
	 	 	 
	 	By:  	Citadel Investment Group, L.L.C., its General
              Partner

    

    
       

    

    
      	 	 	 
	 	
            
	
            	By:  	
               /s/
                Christopher L. Ramsay

            
	 	
              

              Name:
                Christopher L. Ramsay

            
	 	
              Title:
                Authorized Signatory

            

    

     

    
      	 	 	 
	 	
              MERRILL
                LYNCH INTERNATIONAL

            
	 
 	 
 	 
 
	
            	By:  	
               /s/
                Mark Grimley

            
	 	
              

              Name:
                Mark Grimley

            
	 	
              Title:
                Director

            

    

     

    
      	 	 	 
	 	EXECUTIVE:
	 
 	 
 	 
 
	
            	
            	
              /s/
                Yang Tianfu

            
	 	
              

              Yang
                Tianfu

            
	 	
            

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    

    Schedule
      A

     

    Pre-Existing
      Relationships

     

    
      	
              Harbin
                Electric, Inc. (“Company”)

            
	
              Stockholders

            	 	
              Directors

            	 	
              Officers

            
	
              Tianfu
                Yang

            	 	
              Tianfu
                Yang(Chairman)

            	 	
              Tianfu
                Yang(CEO)

            
	
              Tianli
                Yang

            	 	
              Suofei
                Xu

            	 	
              Tianli
                Yang(VP)

            
	
              Suofei
                Xu

            	 	
               

            	 	
              Suofei
                Xu(VP)

            
	
              Zedong
                Xu

            	 	
               

            	 	
              Zedong
                Xu(CFO)

            
	 	 	 	 	 
	
              Advanced
                Electric Motors, Inc. (“AEM”)

            
	
              Stockholders

            	 	
              Directors

            	 	
              Officers

            
	
              Harbin
                Electric,Inc.

            	 	
              Tianfu
                Yang(Chairman)

            	 	
              Tianfu
                Yang(CEO)

            
	
               

            	 	
              Tianli
                Yang

            	 	
              Tianli
                Yang(VP)

            
	
               

            	 	
              Suofei
                Xu

            	 	
              Suofei
                Xu(VP)

            
	
               

            	 	
              Zedong
                Xu

            	 	
              Zedong
                Xu(CFO)

            
	 	 	 	 	 
	
              Harbin
                Tech Full Electric,Co., Ltd. (“WFOE”)

            
	
              Stockholders

            	 	
              Directors

            	 	
              Officers

            
	
              Advanced
                Electric Motors,Inc.

            	 	
              Tianfu
                Yang(Chairman)

            	 	
              Tianfu
                Yang(CEO)

            
	
               

            	 	
              Tianli
                Yang

            	 	
              Tianli
                Yang(VP)

            
	
               

            	 	
              Suofei
                Xu

            	 	
              Suofei
                Xu(VP)

            
	
               

            	 	
               

            	 	
              Zedong
                Xu(CFO)

            
	 
	
              Harbin
                Tech Full Industry,Co., Ltd. (“Industry”)(1)

            
	
              Stockholders

            	 	
              Directors

            	 	
              Officers

            
	
              Tianfu
                Yang (78.8%)

            	 	
              Tianfu
                Yang(Chairman)

            	 	
              Tianfu
                Yang(CEO)

            
	
              Tianli
                Yang (8.2%)

            	 	
              Tianli
                Yang

            	 	
              Tianli
                Yang(VP)

            
	
              Suofei
                Xu (2%)

            	 	
              Suofei
                Xu

            	 	
              Suofei
                Xu(VP)

            
	
              Zedong
                Xu (1%)

            	 	
              Zedong
                Xu

            	 	
              Zedong
                Xu(CFO)

            
	 	 	 	 	 
	
              Harbin
                Taifu Auto, Co., Ltd. (“Auto”)(2)

            
	
              Stockholders

            	 	
              Directors

            	 	
              Officers

            
	
              Harbin
                Tech Full Industry Co.,Ltd. (98%)

            	 	
              Tianfu
                Yang(Chairman)

            	 	
              Tianfu
                Yang(President)

            
	
              Tianli
                Yang (2%)

            	 	
              Tianli
                Yang

            	 	
              Tianli
                Yang(VP)

            
	
               

            	 	
              Zedong
                Xu

            	 	
               

            

    

    Notes:
      

     

    (1)
      Industry has no business operations and is engaged in general research and
      development.

     

    (2)
      Auto
      is engaged in the research and development and the manufacture of diverse kinds
      of auto motors.

     

    
      
         

      

      
        -7-Exhibit
      10.16

    Harbin
      Tech Full Electric Co., Ltd

    

    Agreement

    

    Party
      A:
      Shanghai Lingang Investment and Development Company Limited

    

    Party
      B:
      Harbin Tech Full Electric Co., Ltd.

    

    Based
      on
      the relevant regulations of the People’s Republic of China and the Shanghai
      Municipality, and pursuant to friendly consultations, both parties A and B
      hereby enter into this contract in regards to Party B’s appointment of Party A
      as its agent to handle the matters relating to procedures for the transfer
      of
      land-use rights for the approximately 40,800 square meters of State-owned land
      at the Shanghai Zhuqiao Airport Industrial Zone (hereinafter referred to as
“the
      Lease”), the evacuation work to be carried out at the aforesaid land parcel, and
      the provision and construction of municipal administration infrastructure
      facilities. 

    

    Article
      1: Location and area of the land parcel 

    

    The
      land
      parcel under the Lease is located at Land Lot Number M-5, Shanghai Zhuqiao
      Airport Industrial Zone, and its four boundaries are as follows:

    

    East:
      Yuandong Avenue

    

    South:
      Datian

    

    West:
      Jinliang Road

    

    North:
      Datian

    

    The
      area
      of the land parcel is approximately 40,800 square meters, which is equivalent
      to
      61.2 mu
      (of
      which
      acquired land makes up 6 mu).
      The
      exact area of the land parcel shall be based on the red boundary lines and
      final
      site measurement by the Nanhui District Housing and Land Administration
      Bureau.

    

    Article
      2: Price and use of the land parcel

    

    The
      price
      for the 50-year Lease of the aforesaid land is 330,000 Yuan per mu,
      and the
      total for the parcel is 20.196 million Yuan (twenty million and one hundred
      and
      ninety six thousand Yuan). This includes compensation for land acquisition,
      land
      transfer fee, labor fees, expenses for removing objects on the land parcel,
      and
      expenses for establishing the seven connections and ground leveling. The land
      parcel to be leased is for industrial use. 

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    
      Exhibit
        10.16

    

     

    Article
      3: Method and progress of payments

    

    1.
      Within
      10 days from the date of execution of the present Contract, Party B shall pay
      to
      Party A 50% of the aforesaid total for the land parcel, the amount of which
      is
      equivalent to 10.098 million Yuan. This sum shall serve as ratification of
      the
      present Contract for the land parcel. If Party A does not receive it by the
      stipulated time, the present Contract shall be deemed null and
      void.

    

    2.
      After
      Party A receives the first tranche of the Lease payment, it shall initiate
      relevant procedures for the project set-up and land use on behalf of Party
      B.
      When Party A has completed the matters for the “Site Selection Opinion” and the
“Land Use Permit”, Party B shall pay Party A another 45% of the total for the
      land parcel, the amount of which is equivalent to 9.0882 million
      Yuan.

    

    3.
      Within
      7 days of obtaining the “Permit for the Commencement of Works”, Party B shall
      pay Party A the balance of the total for the land parcel based on its actual
      area. 

    

    4.
      After
      the construction works of Party B have been satisfactorily inspected and
      accepted, Party A shall help Party B process the application for the “Shanghai
      Real Estate Title Certificate.” All fees and taxes associated with the
      application for the “Shanghai Real Estate Title Certificate” shall be borne by
      Party B.

    

    Article
      4: Relevant requirements pertaining to the use of the land
      parcel

    

    1.
      The
      land parcel under the Lease shall be used by Party B for industrial purposes.
      The total investment for the present project is 15 million US dollars. The
      plot
      ratio of the building on the land parcel is 1: 1 to 1.5, the building density
      is
      45%, and the greenery ratio is 25% and above. The design and construction of
      the
      buildings and structures on the land parcel by Party B shall comply with the
      overall planning requirements of the Airport Industrial Zone. The “three wastes”
generated through production and routine activities of Party B on the land
      parcel shall be treated and comply with the relevant regulations of the Shanghai
      Municipality prior to disposal. 

    

    2.
      Party
      B shall register a Sino-foreign joint venture company at the location of Party
      A, with taxes payable at the same location. The basic tax-generation requirement
      is 150,000 Yuan (equivalent to the value-added tax) per mu
      of
      Party
      A land utilized. If Party B is unable to generate the basic amount of tax
      revenue, it undertakes to compensate Party A to the extent of the basic amount
      due the local tax authority. 

    

    Article
      5: Obligations of the parties

    

    Party
      A:

    

    1.
      Responsible for handling the procedures for the Lease of the land parcel
      referred to in Article 1 of the present Contract. After Party B makes the Lease
      payment in accordance with the stipulations of the present Contract, Party
      A
      shall complete the application for the “Site Selection Opinion” and the “Land
      Use Permit” and deliver them to Party B. 

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        10.16

    

     

    2.
      After
      Party B makes the Lease payment, Party A shall provide and construct the
      municipal administration infrastructure facilities on the land
      parcel.

    

    3.
      Assist
      Party B to handle the project reports, submissions, industrial and commercial
      matters and tax registration, and help Party B to handle the procedures for
      temporary electricity supply, water supply and telecommunications during the
      pre-construction period. 

    

    4.
      Responsible for managing Party B’s relationship with the local government and
      rural residents arising from land acquisition during the course of the project
      construction.

    

    Party
      B:

    

    1.
      Coordinate with Party A and provide the necessary documents and information
      in
      relation to the Lease of the aforesaid land parcel.

    

    2.
      Make
      payments in accordance to the method stipulated in the present Contract. If
      there is any delay in payments, Party B shall pay interest to Party A at a
      rate
      higher than the bank lending rate for the same period.

    

    3.
      During
      the course of construction, such as the project design and implementation of
      works, Party B shall carry out the requirements set out in Article 4 of the
      present Contract.

    

    4.
      Responsible for making payment of the various State-required construction
      expenses such as connecting the water supply, electricity, gas, and
      telecommunication lines during construction and production. 

    

    5.
      Within
      the scope of Party A’s administration of works, Party B undertakes that the
      taxes on the latter’s construction of a factory on the said land parcel shall be
      paid at Party A’s location by the construction unit. 

    

    6.
      During
      the period of validity of the land-use rights, Party B shall make payment of
      the
      land-use fees to the Land Administration Bureau as required. 

    

    Article
      6: Responsibilities for breach of contract

    

    If
      any
      one of the parties to the Contract commits an act that violates the stipulations
      therein, it shall be deemed as a breach of contract (except in cases of force
      majeure). The party in breach shall bear the resultant responsibilities.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    
      Exhibit
        10.16

    

    

    Article
      7

    

    Matters
      for which no provision has been made in the present Contract may be resolved
      through mutual consultation or a supplementary agreement. If any disputes occur
      during the course of the performance of the Contract, and such disputes cannot
      be resolved through consultations, the representatives of the parties may pursue
      legal proceedings at a People’s Court that possesses jurisdiction. 

    

    Article
      8

    

    The
      present Contract shall come into effect upon the date of signing and sealing
      by
      both parties.

    

    Article
      9

    

    There
      shall be four originals of the present Contract, with each party to retain
      two
      of them; all four shall have equal legal validity. 

    

    Party
      A:
      Shanghai Lingang Investment and Development Company Limited

    

    Signature
      of representative: 

    
      	 	 	 	 
	/s/
Genyuan
              Ni	 	 	Seal:
              (Sealed)
	
              

            	 	 	
            
	
            	 	 	
            

    

     

    Party
      B:
      Harbin Tech Full Electric Co., Ltd.

    

    Signature
      of representative: 

    
      
        	 	 	 	 
	/s/
                Tianfu
                Yang	 	 	Seal:
                (Sealed)
	
                

              	 	 	
              
	
              	 	 	
              

8th
        of
        September 2006

    

    Place
      of
      execution of Contract: Shanghai Zhuqiao Airport Industrial Zone

     

    
      
        
        

      

      
        4

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