Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of                           , 201     by and between Kimree, Inc., a company incorporated and existing under the laws of the Cayman Islands (the “Company”) and                           , an individual (the “Executive”). The term “Company” as used herein with respect to all obligations of the Executive hereunder shall be deemed to include the Company and all of its direct or indirect subsidiaries and affiliates (collectively, the “Group”).

 

RECITALS

 

A.                                    The Company desires to employ the Executive and to assure itself of the services of the Executive during the term of Employment (as defined below).

 

B.                                    The Executive desires to be employed by the Company during the term of Employment and under the terms and conditions of this Agreement.

 

AGREEMENT

 

The parties hereto agree as follows:

 

1.                                      POSITION

 

The Executive hereby accepts a position of                            (the “Employment”) of the Company.

 

2.                                      TERM

 

Subject to the terms and conditions of this Agreement, the initial term of the Employment shall be commencing on                       , 20     (the “Effective Date”), until                       , 20    , unless terminated earlier pursuant to the terms of this Agreement. The Company and the Executive can determine to extend the Employment through mutual agreement.

 

3.                                      PROBATION

 

There is no probation period for the Employment.

 

4.                                      DUTIES AND RESPONSIBILITIES

 

The Executive’s duties at the Company will include all jobs assigned by the Board of Directors of the Company (the “Board”) or, if authorized by the Board, by the Company’s Chief Executive Officer.

 

The Executive shall devote all of his/her working time, attention and skills to the performance of his/her duties at the Company and shall faithfully and diligently serve the Company in accordance with this Agreement and the guidelines, policies and procedures of the Company approved from time to time by the Board.

 

The Executive shall use his/her best efforts to perform his/her duties hereunder.  The Executive shall not, without the prior written consent of the Board, become an employee or consultant of any entity other than the Company and/or any member of the Group, and shall not carry on or be

 

 

interested in the business or entity that competes with that carried on by the Group (any such business or entity, a “Competitor”), provided that nothing in this clause shall preclude the Executive from holding any shares or other securities of any Competitor that is listed on any securities exchange or recognized securities market anywhere.  The Executive shall notify the Company in writing of his/her interest in such shares or securities in a timely manner and with such details and particulars as the Company may reasonably require.

 

5.                                      NO BREACH OF CONTRACT

 

The Executive hereby represents to the Company that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or otherwise bound, except for agreements that are required to be entered into by and between the Executive and any member of the Group pursuant to applicable law of the jurisdiction where the Executive is based, if any; (ii) that the Executive has no information (including, without limitation, confidential information and trade secrets) relating to any other person or entity which would prevent, or be violated by, the Executive entering into this Agreement or carrying out his/her duties hereunder; and (iii) that the Executive is not bound by any confidentiality, trade secret or similar agreement with any other person or entity except for other member(s) of the Group, as the case may be.

 

6.                                      LOCATION

 

The Executive will be based in                 , China until both parties hereto agree to change otherwise.

 

7.                                      COMPENSATION AND BENEFITS

 

Unless set forth separately in Schedule A, Executive shall receive such compensation and benefits as described in this Section 7.

 

(a)                                 Cash Compensation.  The Executive’s cash compensation (including salary and bonus) shall be determined by the Company and specified in a standalone agreement between the Executive and the Company’s designated subsidiary or affiliated entity and such compensation is subject to annual review and adjustment by the Company, except in the case of the Chief Executive Officer of the Company, his compensation shall be determined by the Board of Directors of the Company or the compensation committee thereof, subject to annual review and adjustment.

 

(b)                                 Equity Incentives.  The Executive will be eligible for participating in the Company’s equity incentive plan(s) pursuant to the terms and conditions thereof as determined by the Board, and any award granted thereunder will be governed by an award agreement to be entered into separately between the Company and the Executive.

 

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(c)                                  Benefits.  The Executive is eligible for participation in any standard employee benefit plan of the Company that currently exists or may be adopted by the Company in the future, including, but not limited to, any retirement plan, life insurance plan, health insurance plan and annual holiday plan.

 

8.                                      TERMINATION OF THE AGREEMENT

 

(a)                                 By the Company.  The Company may terminate the Employment for cause, at any time, without advance notice or remuneration, if (1) the Executive is convicted or pleads guilty to a felony or to an act of fraud, misappropriation or embezzlement, (2) the Executive has been negligent or acted dishonestly to the detriment of the Company, (3) the Executive has engaged in actions amounting to misconduct or failed to perform his/her duties hereunder and such failure continues after the Executive is afforded a reasonable opportunity to cure such failure, (4) the Executive has died, or (5) the Executive has a disability which shall mean a physical or mental impairment which, as reasonably determined by the Board, renders the Executive unable to perform the essential functions of his/her employment with the Company, even with reasonable accommodation that does not impose an undue hardship on the Company, for more than 180 days in any 12-month period, unless a longer period is required by applicable law, in which case that longer period would apply.  In addition, the Company may terminate the Employment without cause, at any time, upon three-month prior written notice to the Executive.  Upon termination without cause, the Company shall provide severance payments to the Executive as expressly required by applicable law of the jurisdiction where the Executive is based.

 

(b)                                 By the Executive.  The Executive may resign from the Company at any time with a three-month prior written notice to the Company.

 

(c)                                  Notice of Termination.  Any termination of the Executive’s employment under this Agreement shall be communicated by written notice of termination from the terminating party to the other party.

 

9.                                      CONFIDENTIALITY AND NONDISCLOSURE

 

(a)                                Confidentiality and Non-disclosure. The Executive agrees at all times during and after the Employment, to hold in the strictest confidence, and not to use, or to disclose to any person, corporation or other entity without written consent of the Company, any Confidential Information, except as required in the performance of the Executive’s duties in connection with the Employment or pursuant to applicable law. The Executive understands that “Confidential Information” means any proprietary or confidential information of the Company, its affiliates, or their respective clients, customers or partners, including, without limitation, technical data, trade secrets, research and development information, product plans, services, customer lists and customers, supplier lists and suppliers, software developments, inventions, processes, formulas, technology, designs, hardware configuration information, personnel information, marketing, finances, information about the suppliers, joint ventures, franchisees, distributors and other persons with whom the Company does business, information regarding the skills and compensation of other employees of the Company or other business information disclosed to the Executive by or obtained by the Executive from the Company, its affiliates, or their respective clients, customers or partners either directly or indirectly in

 

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writing, orally or otherwise, if specifically indicated to be confidential or reasonably expected to be confidential. Notwithstanding the foregoing, Confidential Information shall not include information that is generally available and known to the public through no  breaching the confidential obligations of this agreement by  the Executive.

 

(b)                                 Trade Secrets. During and after the Employment, the Executive shall hold the Trade Secrets (as defined below) in strict confidence; the Executive shall not disclose the Trade Secrets to anyone except other employees of the Company who have a need to know the Trade Secrets in connection with the Company’s business.  The Executive shall not use the Trade Secrets other than for his /her duties of the Company and for the benefits of the Company.

 

“Trade Secrets” means information deemed confidential by the Company, treated by the Company or which the Executive knows or ought reasonably to have known to be confidential, and trade secrets, including without limitation designs, processes, pricing policies, methods, inventions, conceptions, technology, technical data, financial information, corporate structure and know-how, relating to the business and affairs of the Company and its subsidiaries, affiliates and business associates, whether embodied in memoranda, manuals, letters or other documents, computer disks, tapes or other information storage devices, hardware, or other media or vehicles.  Trade Secrets do not include information generally known or released to public domain through no breaching the confidential obligations of this agreement by  the Executive.

 

(c)                                 Company Property. The Executive understands that all documents (including computer records, facsimile and e-mail) and materials created, received or transmitted in connection with his or her work or using the facilities of the Company are property of the Company and subject to inspection by the Company, at any time. Upon termination of the Employment (or at any other time when requested by the Company), the Executive will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company and will provide written certification of his or her compliance with this Agreement. Under no circumstances will the Executive have, following his or her termination, in his or her possession any property of the Company, or any documents or materials or copies thereof containing any Confidential Information.

 

(c)                                 Former Employer Information.  The Executive represents and agrees that, during the term of his/her employment with the Company, he/she has not improperly used or disclosed, and will not improperly use or disclose, any proprietary information or trade secrets of any former employer or other person or entity with which the Executive has an agreement to keep in confidence information acquired by the Executive, if any.  The Executive will indemnify the Company and hold it harmless from and against all claims, liabilities, damages and expenses, including reasonable attorneys’ fees and costs of suit, arising out of or in connection with any violation of the foregoing.

 

(d)                                 Third Party Information.  The Executive recognizes that the Company may have received, and in the future may receive, from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.  The Executive agrees that the Executive owes the Company and such third parties, during the Executive’s employment by the Company and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person or

 

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firm and to use it in a manner consistent with, and for the limited purposes permitted by, the Company’s agreement with such third party.

 

This Section 9 shall survive the termination of this Agreement for any reason.  In the event the Executive breaches this Section 9, the Company shall have right to seek remedies permissible under applicable law.

 

10.                               INVENTIONS

 

(a)                                 Inventions Retained and Licensed. The Executive has attached hereto, as Schedule B, a list describing all inventions, ideas, improvements, designs and discoveries, whether or not patentable and whether or not reduced to practice, original works of authorship and trade secrets made or conceived by or belonging to the Executive (whether made solely by the Executive or jointly with others) that (i) were developed by the Executive prior to the Executive’s employment by the Company (collectively, “Prior Inventions”), (ii) relate to the Company’ actual or proposed business, products or research and development, and (iii) are not assigned to the Company hereunder; or, if no such list is attached, the Executive represents that there are no such Prior Inventions.  Except to the extent set forth in Schedule B, the Executive hereby acknowledges that, if in the course of his/her service for the Company, the Executive incorporates into a Company product, process or machine a Prior Invention owned by the Executive or in which he/she has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide right and license (which may be freely transferred by the Company to any other person or entity) to make, have made, modify, use, sell, sublicense and otherwise distribute such Prior Invention as part of or in connection with such product, process or machine.

 

(b)                                 Disclosure and Assignment of Inventions. The Executive understands that the Company engages in research and development and other activities in connection with its business and that, as an essential part of the Employment, the Executive is expected to make new contributions to and create inventions of value for the Company.

 

From and after the Effective Date, the Executive shall disclose in confidence to the Company all inventions, improvements, designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works and trade secrets (collectively, the “Inventions”), which the Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of the Executive’s Employment at the Company.  The Executive acknowledges that copyrightable works prepared by the Executive within the scope of and during the period of the Executive’s Employment with the Company are “works for hire” and that the Company will be considered the author thereof.  The Executive agrees that all the Inventions shall be the sole and exclusive property of the Company and the Executive hereby assigns all his/her right, title and interest in and to any and all of the Inventions to the Company or its successor in interest without further consideration.

 

(c)                                  Patent and Copyright Registration. The Executive agrees to assist the Company in every proper way to obtain for the Company and enforce patents, copyrights, mask work rights, trade secret rights, and other legal protection for the Inventions.  The Executive will execute any documents that the Company may reasonably request for use in obtaining or enforcing such patents, copyrights, mask work rights, trade secrets and other

 

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legal protections.  The Executive’s obligations under this paragraph will continue beyond the termination of the Employment with the Company, provided that the Company will reasonably compensate the Executive after such termination for time or expenses actually spent by the Executive at the Company’s request on such assistance.

 

(d)                                 Return of Confidential Materials.  In the event of the Executive’s termination of employment with the Company for any reason whatsoever, the Executive agrees promptly to surrender and deliver to the Company all records, materials, equipment, drawings, documents and data of any nature pertaining to any confidential information or to his/her employment, and the Executive will not retain or take with him/her any tangible materials or electronically stored data, containing or pertaining to any confidential information that the Executive may produce, acquire or obtain access to during the course of his/her employment.

 

This Section 10 shall survive the termination of this Agreement for any reason.  In the event the Executive breaches this Section 10, the Company shall have right to seek remedies permissible under applicable law.

 

11.                               NON-COMPETITION AND NON-SOLICITATION

 

In consideration of the Employment, the Executive agrees that during the term of the Employment and for a period of               year(s) following the termination of the Employment for whatever reason:

 

(a)                                 The Executive will not approach suppliers, clients, customers or contacts of the Company or other persons or entities introduced to the Executive in the Executive’s capacity as a representative of the Company for the purposes of doing business with such persons or entities which will harm the business relationship between the Company and such persons and/or entities;

 

(b)                                 unless expressly consented to by the Company, the Executive will not assume employment with or provide services as a director or otherwise for any Competitor, or engage, whether as principal, partner, licensor or otherwise, any Competitor; and

 

(c)                                  unless expressly consented to by the Company, the Executive will not seek directly or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any employee of the Company employed as at or after the date of such termination, or in the year preceding such termination.

 

In consideration of the foregoing, the Company shall pay, through its designated subsidiary or affiliated entity, compensation to the Executive in an aggregate amount equal to             % of the Executive’s annual base salary for the last year prior to the termination of the Employment, in              equal installments on a monthly basis after the termination of the Employment.

 

The provisions contained in this Section 11 are considered reasonable by the Executive and the Company.  In the event that any such provisions should be found to be void under applicable laws but would be valid if some part thereof was deleted or the period or area of application reduced, such provisions shall apply with such modification as may be necessary to make them valid and effective.

 

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This Section 11 shall survive the termination of this Agreement for any reason.  In the event the Executive breaches this Section 11, the Executive acknowledges that there will be no adequate remedy at law, and the Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including monetary damages if appropriate).  In any event, the Company shall have right to seek all remedies permissible under applicable law.

 

12.                               WITHHOLDING TAXES

 

Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such national, provincial, local or any other income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

13.                               ASSIGNMENT

 

This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that (i) the Company may assign or transfer this Agreement or any rights or obligations hereunder to any member of the Group without such consent, and (ii) in the event of a merger, consolidation, or transfer or sale of all or substantially all of the assets of the Company with or to any other individual or entity, this Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of such successor and such successor shall discharge and perform all the promises, covenants, duties, and obligations of the Company hereunder.

 

14.                               SEVERABILITY

 

If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

 

15.                               ENTIRE AGREEMENT

 

This Agreement constitutes the entire agreement and understanding between the Executive and the Company regarding the terms of the Employment and supersedes all prior or contemporaneous oral or written agreements concerning such subject matter.  The Executive acknowledges that he/she has not entered into this Agreement in reliance upon any representation, warranty or undertaking which is not set forth in this Agreement.

 

16.                               GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with the law of the Cayman Islands.

 

17.                               AMENDMENT

 

This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

 

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18.                               WAIVER

 

Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

19.                               NOTICES

 

All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, or (iii) sent by a recognized courier with next-day or second-day delivery to the last known address of the other party.

 

20.                               COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.  Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

21.                               NO INTERPRETATION AGAINST DRAFTER

 

Each party recognizes that this Agreement is a legally binding contract and acknowledges that such party has had the opportunity to consult with legal counsel of choice.  In any construction of the terms of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such terms.

 

[Remainder of this page has been intentionally left blank.]

 

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.

 

	
 
    	
Kimree, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Executive
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature:
    	
 
    
	
 
    	
Name:
    
				

 

 

Schedule A

 

Terms of Compensation and Benefits

 

 

Schedule B

 

List of Prior Inventions

 

	
Title
    	
 
    	
Date
    	
 
    	
Identifying Number
    or Brief Description
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
               No inventions or improvements
    	
 
    
	
               Additional Sheets Attached
    	
 
    
	
Signature of   Executive:
    	
 
    	
 
    
	
Print Name of   Executive:
    	
 
    
	
Date:
    	
 
    	
 
    
				

 

11Exhibit 10.3

 

Huizhou Kimree Technology Co., Ltd. Purchase Agreement

 

Part 1 Purchase Management

 

Part 2 Quality Maintenance

 

Part 3 Disposal of Spoiled Materials

 

	
Party A: Huizhou Kimree Technology Co., Ltd.   (Official seal or dedicated seal)
    	
 
    	
Party B: Huizhou Huiderui Lithium Battery   Technology Co., Ltd. (Official seal or dedicated seal)
    
	
/s/ seal
    	
 
    	
/s/ seal
    
	
Business License No.
    	
 
    	
Business License No. 441300000183196
    
	
Agent:
    	
/s/ Authorized Signatory
    	
 
    	
Agent:
    	
 
    
	
Approval: 
    	
 
    	
 
    	
Approval: 
    	
 
    

 

Address: Level 3-4, Building A, Litao Industrial Park, Area 50, Zhongkai Hi-Tech Zone, Huizhou, Guangdong, China

Tel: (0752) 5750288 Fax: (0752) 5750289 (8066)

 

 

Part 1 Purchase Management

 

To define the rights and obligations of respective parties and in the spirit of mutual benefit and friendly cooperation, the two parties enter into this Agreement.

 

I. Definition of “purchase” under this Agreement:

 

“Purchase” under this Agreement refers to the transaction under which Party A places a Purchase Order with Party B, Party B produces according to Party A’s processing drawings, technical indices, quality standards, acceptance standards and other requirements and delivers the goods to the place designated by Party A, and then Party A, after conducting acceptance inspection, pays Party B for the goods according to the unit price set out in the Purchase Order and the quantity of goods it actually receives.

 

II. Determination of unit purchase price

 

2.1                               Party B shall, in the spirit of honesty, provide a true cost analysis form and put forward reasonable profit requirements. On this basis, Party A and Party B shall determine the final unit purchase price.

 

2.2                               Party B shall promptly adjust the unit price for goods supplied to Party A according to the changes in the market prices of raw materials or changes in production techniques and other cost factors. In case of any price change, the Purchase Order placed before adjustment shall be executed as per the original price and the Purcahse Order placed after adjustment shall be executed as per the new price. If Party B offers a price lower than Party A’s other suppliers of the same type of raw materials, Party A shall have the obligation to give more orders to Party B; and if Party B offers a higher price, Party A shall have the right to reduce the orders to Party B and even cancel its supply qualifications.

 

2.3                               If Party A has any doubt about Party B’s cost analysis form, Party A shall have the right to conduct an on-the-spot investigation to learn about Party B’s cost structure, and Party B shall have the obligation to provide information about cost factors as reasonably required by Party A.

 

2.4                               Party A and Party B shall keep relevant cost information and unit transaction price in confidence and shall not disclose them to any third party for any reason (unless otherwise stipulated by the law).

 

III. Order confirmation

 

3.1.                            Party A shall place orders with Party B mainly with the Purchase Order. After

 

 

receiving the Purchase Order from Party A, Party B shall, within four hours, confirm the specification, quantity, unit price, delivery time, payment method, etc. relating to the goods as set out in the order and send it back to Party A after affixing of signatures and seals, which shall be deemed as the basis for the confirmation of the Purchase Order by the two parties.

 

3.2.                            Cancellation or change of orders

 

3.2.1                     If the Purchase Order is cancelled or changed for reasons ascribable to Party A, Party A shall send a Changed Purchase Order to Party B by fax and call Party B to confirm whether Party B has received the changed order. Party B shall, within two hours after receiving the Changed Purchase Order from Party A, confirm the order and send it back to Party A after affixing of signatures and seals. Where Party B fails to send it back on time, Party A may deem that Party B has accepted the Changed Purchase Order.

3.2.2                     After receiving and confirming the Changed Purchase Order from Party A, Party B shall immediately stop production of the original order and give feed back of the actual quantity of goods produced to Party A within one hour. Party A shall only be responsible for purchasing the goods actually produced. If Party B falsely reports the quantity of goods produced, Party A shall have the right to refuse to purchase the goods actually produced by Party B, and Party B shall bear all the losses incurred to it; and Party B shall compensate Party A for all the losses (if any) incurred to Party A arising from false report of quantity.

 

3.3.                  Party B shall not prepare materials unless it has got the FORCAST signed by Party A’s purchase manager. If Party B fails to do so, thereby suffering losses, Party A shall not bear any liability. Unless permitted by Party A, Party B shall not use the materials prepared for other purposes.

 

IV. Delivery of goods

 

4.1                     The Purchase Period depends on the technique for producing the goods supplied by Party B to Party A. The Purchase Period agreed upon by and between Party A and Party B shall prevail. If Party B fails to fulfil its obligations to Party A within the specified period, Party A shall have the right to ask Party B for a penalty of at least RMB2,00/day (inclusive) for period extension.

 

Cycle for procurement of materials (normal delivery) arrival of the goods at the factory       days (including weekends, Saturdays and Sundays), cycle for procurement of materials in urgency (normal early period) arrival of the goods at the factory       days (not including weekends); cycle for early period in urgency (with preparation) arrival of the goods at the factory      days (including weekends, Saturdays and Sundays), cycle for early period in urgency (with preparation) arrival of the goods at the factory       days (excluding weekends).

 

4.2                     Party B shall deliver the goods in due time as per the delivery date and place designated by Party A in the Purchase Order, with all the transportation fees to be

 

 

borne by Party B. Party B shall provide spares for free as per 0.3‰ of the quantity in Party A’s order, so as to facilitate Party A’s inspection.

 

4.3                     When delivering goods, Party B shall issue, according to the following requirements, an Acceptance Check Entry Sheet uniformly provided by Huizhou Kimree Technology Co., Ltd.

 

4.3.1                     The Acceptance Check Entry Sheet shall be uniformly printed and sold by us to various suppliers and the suppliers shall fill in legible block letters and shall not dislocate or alter the contents or specify the unit price and amount.

4.3.2                     Party B’s supplier code and Party A’s order number recorded in Party A’s order, Party A’s material code and material description, the quantity and unit of the goods delivered by Party B and signature (full name) of Party B’s deliveryman shall be filled in. The factors and quantity set out in the Acceptance Check Entry Sheet shall be consistent with the actual ones and indications.

4.3.3                     Materials with different order numbers shall not share the same Acceptance Check Entry Sheet, and several kinds of materials with the same order number may share the same Acceptance Check Entry Sheet (that is, one Acceptance Check Entry Sheet shall have only one order number).

4.3.4                     Party B shall prudently issue the Acceptance Check Entry Sheet for the same kind of materials with different order numbers, and first issue the Acceptance Check Entry Sheet for the orders first placed. The recovery of return orders to be inspected shall be handled separately. If Party B’s failure to issue Acceptance Check Entry Sheet in the aforesaid order causes data confusion to Party A, Party B shall pay a compensation of RMB200/time.

 

4.4  Packaging requirements

 

4.4.1                     Party B shall package materials in small, medium and outer packages as specified by Party A. Labels posted on the small, medium and outer packages of materials shall read clearly the purchase order number, material code, specification, model and quantity without signs of correction; and the packing boxes shall be intact.

 

4.4.2                     Party B shall package materials for Party A’s convenience for counting; there shall be only one packaging mantissa for one type of materials delivered at a time; and the packing boxes shall be KMK cartons (which can be recycled by Party B) as required by Party A. Party B may entrust Party A to purchase cartons for it if necessary, with expenses borne by Party B; where the packaging fails to meet Party A’s requirements, Party A shall have the right to refuse to accept goods and shall be free from any responsibility for all losses arising therefrom.

 

4.4.3                     Mixed packaging or freight shortage is not allowed. For freight shortage, Party A shall take delivery as per the quantity of materials actually received; Party B shall

 

 

be fined 10 times of materials for three times or more of freight shortage; for a mixed package, Party A shall take delivery as per the material name marked on the label posted on the said package and the actual number counted of the said material; materials mixed shall be deemed as disqualified by Party A.

 

5. Settlement of payments

 

5.1                               Both parties agree that payments owed to Party B shall be         ; the Statement of Account issued by Party B shall be audited by Party A’s financial department; and Party B shall provide corresponding collection vouchers. All of the said vouchers are required and they shall be consistent with each other.

 

5.2                               Where Party A fails to duly pay Party B for materials due to Party B’s failure to provide invoices and other settlement data in time, Party A is not obliged to take responsibility for delay of payment.

 

5.3                               If Party B changes its company name or changes or cancels its account, Party B shall settle all businesses and payments with Party A before the said circumstances occur. Where Party A fails to pay Party B payments for materials or other payments for reasons ascribable to Party B, Party A shall not take any responsibility.

 

5.4                               In the event of any problem in the service, delivery time, quality, etc. on the part of Party B, Party A shall have the right to refuse or suspend payment until the said problem is settled through negotiation between the two parties.

 

5.5                               In the event of any compensation for breach of contract, compensation for poor quality and other compensations that shall be borne by Party B, Party A shall send a Claim Application to the Supplier to notify Party B; and such compensations shall be made by deduction of payments for materials or quality guarantee deposits or by telegraphic transfer, etc.

 

6.                                      Other descriptions

 

If the materials given to Party A by Party B is protected by intellectual property rights, the parties shall enter into an intellectual property protection agreement in accordance with the relevant laws of the state; where trademark licensing exists, the parties shall enter into a trademark licensing agreement. If there is infringement or other illegal behaviors in the materials supplied to Party A by Party B, Party B shall be liable for all the legal and economic liabilities.

 

7.                                      Liabilities for breach of this Agreement

 

7.1                               Party B shall confirm Party A’s Purchase Order by signing and sealing it and returning it to Party A within four hours; in case of failure to return it in time for

 

 

special reasons, Party B may inform Party A in writing of the specific time for contract review and postpone the confirmation appropriately. If Party B delays confirmation of Purchase Order for no reason, resulting in Party A’s production plan being affected, Party A will charge Party B a compensation of RMB200 for each day delayed for each order; if Party B delays delivery of goods for twice successively in a month, Party A shall charge a compensation of RMB1,000 for the second delay; in case of delay for over four days (inclusive), Party A shall have the right to unilaterally cancel the order, and all losses incurred to Party B shall be borne by Party B. If Party B fails to deliver the goods on time due to force majeure, Party B may not bear liability for delayed delivery of goods, but it shall provide relevant proof of force majeure within three workdays. If Party B delivers goods in advance or delivers more goods than ordered without consent of Party A, Party A shall have the right to reject.

 

7.2                               Party A shall have ownership over all drawings, photographic films, molds, etc. provided to Party B, Party B shall not reveal, use or grant to a third party without written consent of Party A. In case of infringement, Party A may pursue Party B for liability in accordance with the Copyright Law of the People’s Republic of China and Patent Law of the People’s Republic of China and charge Party B a compensation for breach of this Agreement of RMB50,000.

 

7.3                               Party A and Party B shall keep relevant cost information and unit transaction price in confidence and shall not disclose them to any third party for any reason (unless otherwise stipulated by the law). If one party reveals information to any third party in violation of this Agreement resulting in losses to the other party, the defaulting party shall assume all reasonable losses of the other party.

 

 

Part 2 Quality Maintenance

 

Party A and Party B shall strictly observe Technical Standard or Technology Agreement that the two parties signed (generally in the form of product specification), amendment to the Technical Standard that Party A is entitled to make based on the circumstances shall not affect the effectiveness of this Agreement; if problems or accidents due to poor quality occur resulting from Party B breaching this Agreement, Party B shall take full responsibility and compensate for losses of Party A with reference to relevant terms of this part.

 

1. Designation and quality control of Party B’s main raw materials

 

1.1 To ensure consistent and stable quality of components, Party B shall designate its matched raw material and provide relevant samples, and inspection & test reports.

 

1.2 Party B shall strictly inspect the key raw materials to be purchased, and shall establish a strict entrusted inspection system and quality archive for the materials that Party B is unable to inspect before purchase.

 

1.3 Party B shall strictly implement batch management on raw materials and strictly prohibit using expired raw materials.

 

1.4 Party B shall ask for Party A’s consent before it changes raw materials or raw material manufacturer and shall resupply relevant samples and inspection & test reports.

 

2. Control over Party B’s manufacturing process

 

2.1 Party B shall establish necessary quality control points for key processes so as to ensure consistent and stable product quality. Party B must get written consent of Party A before it changes key processes or suppliers during its bulk supply.

 

2.2 Party B shall prepare operation instruction for its production line and work out daily report for first pass yield, daily report for relevant inspections and relevant analytical and improvement report. Party B shall provide the said data reports when Party A deems it necessary.

 

2.3 Party A may send someone to Party B’s site for inspection and guidance when it believes it necessary; and Party B shall provide assistance.

 

3. Standard for goods supply of Party B

 

3.1 Party B shall, before delivery of goods, provide Party A with written information of the products to be supplied unsuitable for use or storage on certain conditions (if any).

 

 

Otherwise, it shall be deemed as quality problems of the products supplied by Party B where uninformed Party A uses or stores the products supplied by Party B by mistake resulting in quality problems.

 

3.2 Party B shall not have its products leave its factory before they pass the inspection, and shall attach ex-factory qualification test report for each batch of its products.

 

3.3 Party B shall mark on the outer box any change made by Party B as approved by Party A to functional parameters or improvement to defects of the products.

 

3.4 Labels stuck on packages (including minimum package) of Party B’s products must bear: material code, specifications and models and batch number.

 

3.5 Party B’s products which must be kept free from static electricity (such as SMD diode, triode, LED, LCD, and semi-finished PCB) shall be packaged in anti-static material with surface impedance of 106~1010W.

 

3.6 Party B must silk-screen print relevant installation symbols on all devices. Where any component is too small for silk-screen printing, Party B must issue document formally explaining it in advance and get consent of Party A.

 

3.7 Party B must strictly implement batch management to ensure consistent and reliable product quality. The period of producing the same batch of products shall not exceed        months. In the meantime, Party B’s finished products shall not be stored more than        months in Party B’s warehouse; otherwise, the products must pass another inspection before it can be supplied to Party A.

 

3.8 Party B as an agent shall not change the brand of goods to be supplied without written consent of Party A; otherwise, Party B shall be responsible for all losses.

 

4. Party B must get Party A’s written consent in advance if it has goods produced by original equipment manufacturer (OEM).

 

4.1 Party B shall, upon receiving the quality problems fed back by Party A, arrive at Party A’s site to confirm the problems within 48 hours, and take effective corrective and remedial measures as soon as possible and provide Party A with written Corrective Action Report in time within the time limit promised.

 

5. Control on the acceptable quality level (AQL) of the goods supplied by Party B

 

5.1 The pass rate of the goods supplied by Party B shall reach the AQL value set by Party A. Party A’s inspection department shall, with reference to the said AQL value, conduct sampling inspections as per the general inspection level II and a single normal sampling plan specified in Sampling Procedures and Tables for Lot-by-lot Inspection by Attributes

 

 

(GB2828.1-2003).

 

Note: The latest version of GB/T2828 standard shall prevail.

 

5.2 The online project defect rate shall be <       PPM.

 

6. Control on the changes of the goods supplied by Party B

 

6.1 If Party B needs to change the production techniques, product parameters, raw materials, etc. during production, Party B shall notify Party A’s purchase department and quality department in writing in advance and shall, with the written consent of Party A, make relevant changes according to the certified use flows. Otherwise, Party B shall be liable for the losses arising therefrom.

 

6.2 Party B shall not modify the molds of the products supplied in batches before receiving the Notice of Mold Modification signed and confirmed by Party A’s purchaser.

 

7. Periodic tests and reliability monitoring on the goods supplied by Party B

 

7.1 Party B shall conduct periodic tests and reliability tests in strict compliance with relevant standards or technical requirements, and shall provide Party A with test reports semiannually.

 

7.2 Certification of Party B’s products: Party B shall provide Party A with relevant standard-compliant certification documents for its products as required by Party A.

 

8. Compensation and penalty relating to quality responsibility

 

8.1 The following quality compensation and punishment shall be based upon confirmation of the facts by Party A and Party B. Party B shall confirm with Party A within one workday after receiving the abnormal confirmation notice from Party A; or be deemed as having accepted Party A’s conclusion if no confirmation is made after one workday. Party B shall not use Party A’s conclusion of IQC inspection pass as a reason for its exemption from liability for the quality of goods supplied.

 

8.2 If the case is true to the fact and the conditions for compensation and penalty as specified in Clause 8.3 of this Agreement are met, and Party B, within one workday after receiving the written confirmation of compensation/penalty from Party A, fails to sign and send back or refuse to sign the confirmation without raising any written objection, Party A shall have the right to execute the compensation/penalty.

 

8.3 Detailed rules for compensation and penalty

 

	
SN
    	
 
    	
Quality problem
    	
 
    	
Compensation/penalty
    
	
8.3.1
    	
 
    	
Party A suffers losses due to
    	
 
    	
1. Party B shall compensate Party A in full for all
    

 

 

	
 
    	
 
    	
the quality of the goods supplied by Party B.
    	
 
    	
the economic losses arising therefrom.

2. Regarding any significant quality problem, Party A shall have the   right to suspend payment to Party B.

3. If Party A suffers serious quality complaints arising therefrom,   Party B shall pay Party A a penalty of two to five times of Party A’s   economic losses and of no less than RMB1,000.

4. Regarding any accident caused by the quality of the goods supplied   by Party B, Party A shall have the right to further pursue Party B for legal   liability.
    
	
8.3.2
    	
 
    	
The goods supplied by Party B involve potential safety hazards.
    	
 
    	
1. Party B shall compensate Party A in full for all the economic   losses arising therefrom.

2. Party B shall pay Party A a penalty of two to five times of Party   A’s economic losses and of no less than RMB1,000.

3. Party B shall pay Party A a penalty of two to five times of Party   A’s economic losses and of no less than RMB1,000.

3. Regarding any accident caused by the quality of the goods supplied   by Party B, Party A shall have the right to further pursue Party B for legal   liability.
    
	
8.3.3
    	
 
    	
The external cooperation factory consigned by Party A suffers losses   due to the quality of goods supplied by Party B.
    	
 
    	
1. Party B shall compensate the external cooperation factory for all   the economic losses.

2. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.
    
	
8.3.4
    	
 
    	
When inspecting the goods supplied by Party B according to the   sampling standards, Party A finds the batch defective, that is, the quantity   of defective products found in sampling inspection/total quantity of products   sampled > 10%.
    	
 
    	
Party B shall be fined RMB500 for each batch.
    
	
8.3.5
    	
 
    	
Mixed materials are found in the goods supplied by Party B during   inspection or use in production lines.
    	
 
    	
1. If a whole box of goods supplied by Party B involve mixed   materials, Party B shall be fined at a ratio of 10:1 (i.e., penalty = unit   price x quantity of mixed materials x 10). Note: The minimum and maximum   penalties shall be RMB1,000 and
    

 

 

	
 
    	
 
    	
 
    	
 
    	
RMB10,000, respectively.

2. If part of the goods delivered by Party B in a box involves mixed   materials, Party B shall be fined at a ratio of 20:1 (i.e., penalty = unit   price x quantity of mixed materials x 20); Note: The minimum and maximum   penalties shall be RMB1,000 and RMB10,000, respectively.
    
	
8.3.6
    	
 
    	
The goods supplied by Party B fail to pass Party A’s inspection and   Party A has to select some to use, or Party A finds the defect rate is beyond   the AQL value in use and has to select some to use.
    	
 
    	
1. Party B shall bear the expenses for Party A’s selection as per   RMB18/person/hour (RMB200 at least). Note: Party A will inform Party B of the   latest calculation method in case of any increase in cost due to selection.

2. Regarding batch effectiveness, Party B shall also pay a penalty as   per Item 8.3.4.
    
	
8.3.7
    	
 
    	
While Party B has taken countermeasures against the defects and has   affirmed the validity of such countermeasures, quality problems are found   again.
    	
 
    	
Party B shall be fined RMB2,000 for each batch supplied. If the same   problem is found in the same kind of materials twice in a row, Party A shall   have the right to reject inspection when Party B supplies such materials   again.
    
	
8.3.8
    	
 
    	
Party B fails to provide written analysis and correction reports for   any problem found in the quality of its goods supplied within the specified   time.
    	
 
    	
Party B shall be fined RMB2,000 for each day delayed and shall make up   the said reports to Party A.
    
	
8.3.9
    	
 
    	
Party B fails to provide periodic and reliability test reports in due   time (as shown in the product specification verified by the two parties).
    	
 
    	
1. Party B shall be fined RMB2,000 each time and shall make up the   said reports to Party A.

2. Party B shall compensate Party A for the expenses for tests and   assays arising therefrom.
    
	
8.3.10
    	
 
    	
Without the prior consent of Party A, Party B makes changes to the   factors related to the products that are confirmed by both parties, including   but not limited to key production techniques, product parameters (including   material formula), product structure, material composition, raw materials and   suppliers of key auxiliary materials.
    	
 
    	
1. Party B shall be fined RMB20,000 each time.

2. Party B shall also make compensation and pay a penalty for the   losses incurred to Party A arising therefrom pursuant to Item 8.3.1.

3. Party B shall compensate Party A for the expenses for tests and   assays arising therefrom.
    

 

 

	
8.3.11
    	
 
    	
Without the written consent of Party A, Party B modifies the molds   after Party A mass–produces relevant products. After modifying molds or   making new molds, Party B directly supplies goods without sending new samples   for inspection.
    	
 
    	
1. Party B shall be fined not less than RMB5,000 each time.

2. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.
    
	
8.3.12
    	
 
    	
Party B provides Party A with false certification documents or test   reports, including but not limited to MSDS and ROHS, UL and CE of third   parties.
    	
 
    	
1. Party A shall suspend all payments to Party B.

2. Party B shall be fined more than RMB10,000 each time.

3. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.
    
	
8.3.13
    	
 
    	
Party B (when as an agent) supplies other brands of goods without   Party A’s permission.
    	
 
    	
1. Party B shall be fined more than RMB10,000 each time.

2. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.

3. Party B shall compensate Party A for the expenses for tests and   assays arising therefrom.
    
	
8.3.14
    	
 
    	
Party B subcontracts the production of goods to be supplied to OEM   without Party A’s written consent.
    	
 
    	
1. Party B shall be fined more than RMB10,000 each time.

2. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.

3. Party B shall compensate Party A for the expenses for tests and   assays arising therefrom.
    
	
8.3.15
    	
 
    	
Party B subcontracts processing of the goods to be supplied to Party A   to a manufacturer without Party A’s written consent.
    	
 
    	
1. Party B shall be fined more than RMB10,000 each time.

2. Party B shall also make compensation and pay a penalty for the   losses (if any) incurred to Party A arising therefrom pursuant to Item 8.3.1.

3. Party B shall compensate Party A for the expenses for tests and   assays arising therefrom.
    
	
8.3.16
    	
 
    	
Party B, being aware of its product defects or without improving the   known defects, continues to deliver the defective goods without Party A’s   consent.
    	
 
    	
1. Party B shall be fined RMB1,000 for the first time, RMB2,000 for   the second, RMB4,000 for the third, and so on.

2. Party A’s IQC inspectors shall reject inspection of the materials   supplied by Party B.
    

 

 

Part 3 Disposal of Spoiled Materials

 

1.1.    Disposal of batch of defective goods

 

Batch defective goods refer to batch spoiled goods that cannot be warehoused after Party A’s quality department inspects the goods delivered by Party B as substandard in batch. Party A shall return the whole batch of defective goods to Party B and impose the penalty on Party B according to relevant provisions of Quality Maintenance.

 

1.2.    Disposal of “defective incoming materials”:

 

“Defective incoming materials” refer to spoiled goods that are judged by Party A’s quality department during Party A’s production and confirmed by Party B as defective incoming materials from Party B after passing Party A’s inspection and entering warehouse. Party A shall return all the “defective incoming materials” to Party B. Payment for the materials returned shall be deducted from the payment made by Party B in the current month, and the unit price for the goods returned shall be the maximum unit price for the goods delivered by Party B in the current month (calendar month, same below), or in the event of no delivery made in the current month, shall be the maximum unit price for the goods delivered by Party B last month, and so on, until the month of delivery of goods. Transportation fees and all other fees arising from return of goods shall be fully borne by Party B.

 

1.3.    Disposal of “defective production goods”:

 

“Defective production goods” refer to spoiled goods arising from immature production technique or improper operation during Party A’s production. The two parties agree to dispose of the “defective production goods” as follows (the following information is mandatory and is not optional): To be disposed of by Party A at its own discretion

 

1.4.    Disposal of “dull materials”

 

“Dull materials” refer to good materials that become unnecessary for Party A due to Party A’s change of its production plan. The two parties agree to dispose of the dull materials as follows (the following information is mandatory and is not optional): Subject to negotiation between the two parties

 

1.5.    Method of return of spoiled materials

 

1.5.1                     Party B shall clear up its spoiled materials kept by Party A in Party A’s spoiled materials warehouse before each delivery of goods. If Party B’s delivery cycle or the interval of each delivery is too long and too many spoiled materials are backlogged in Party A’s warehouse,

 

 

the purchasing staff of Party A will fax the inventory list of spoiled materials to Party B, and Party B shall, within three workdays after its receipt of the fax, complete formalities of return of outsourced goods at Party A’s spoiled materials warehouse and clear up its spoiled materials in Party A’s stock. If Party B fails to do as aforesaid within three workdays after its receipt of the fax, Party A shall have the right to unilaterally complete the return of Party B’s spoiled materials, with the physical spoiled materials to be disposed of by Party A and relevant liabilities and losses to be wholly borne by Party B.

 

1.5.2 If Party B cannot dispose of the spoiled materials kept in Party A’s warehouse on site, Party B may issue the Authorization for Business Handling to entrust Party A’s staff handle relevant business on its behalf. Party B shall bear all fees (including express fee and packing fee) arising from the handling by Party A’s staff, as well as rights and obligations on relevant businesses to be handled by the authorized person within the validity period of authorization specified in the Authorization for Business Handling.

 

1.6       Handling of return of goods

 

1.6.1                     Return of batch defective goods

 

If the goods delivered by Party B are inspected as substandard in batch and should be returned, Party B shall directly complete formalities of return of goods with Party A’s receiving office in charge of its materials, and the Return Note signed by handlers of the two parties shall serve as certificate of handover of physical materials. Party B shall have Release Note issued by the designated person of Party A upon presentation of the copy of Return Note for supplier. Financial payment shall be settled upon presentation of Return Note.

 

1.6.2 Other types of return of goods

 

For defective goods found (generated) after passing Party A’s inspection and entering warehouse, Party B shall directly complete formalities of return of goods with Party A’s warehouse administration office in charge of its spoiled materials, and the Return Note signed by handlers of the two parties shall serve as certificate of handover of physical materials. Party B shall have Release Note issued by the designated person of Party A upon presentation of the copy of Return Note for supplier. Financial payment shall be settled upon presentation of Return Note.

 

Any dispute arising from performance of this Agreement shall be settled through negotiation between the two parties, or should the negotiation fail, be referred to the court of Party A’s location for ruling.

 

Matters not covered herein shall be subject to other agreements signed by the two parties.

 

This Agreement shall be executed in two counterparts, with one held by either party respectively.

 

 

This Agreement shall be subject to the interpretation of Party A, and matters not covered shall be settled through negotiation between the two parties.

 

This Agreement shall take effect upon affixing of signatures and seals of representatives of the two parties.

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