Document:

exv10w3

Exhibit 10.3

DSH #2 Building Lease Agreement

This DSH #2 Building Lease Agreement (the “Lease Agreement”) is made and effective as of August
11, 2008, by and between SHANGHAI KAI HONG TECHNOLOGY ELECTRONIC CO., LTD. (“DSH”) and SHANGHAI
YUAN HOWE ELECTRONICS CO., LTD. (“Yuan Howe”). DSH and Yuan Howe are collectively referred to as
the “Parties” and individually as a “Party”.

RECITALS

A. DSH and Yuan Howe, on January 22, 2008, entered into a memorandum of understanding that Yuan
Howe is to construct a manufacturing facility, which will be located at No. 2, Lane 18, SanZhuang
Road, Songjiang Export Zone, Shanghai, People’s Republic of China (“DSH #2 Building”) and to lease
this DSH #2 Building and other relevant support facilities to DSH; and

B. DSH and Yuan Howe, based on relevant laws of the People’s Republic of China and the city of
Shanghai, now desire to enter into a Lease Agreement with detail terms and conditions concerning
the construction and the lease of the DSH #2 Building and relevant support facilities.

 

 

     Now, THEREFORE, in consideration of the premises and of the mutual covenants contained in this
Lease Agreement, the Parties agree as follows:

1. Definitions

Unless otherwise defined in this Lease Agreement, the terms used herein shall have the following
meanings:

1.1. “DSH #2 Building” shall mean the building in construction located at No.2 Lane 18 SanZhuang
Road, Songjiang Export Processing Zone, Shanghai, People’s Republic of China (“PRC”). A general
overview of the DSH #2 Building area is set forth in the Exhibit 1 of this Lease Agreement.

1.2. “DSH #1 Building” shall mean the building located at No. 1 Lane 18 SanZhuang Road, Songjiang
Export Processing Zone, Shanghai, PRC.

1.3. “Skyway Bridges” shall mean two crosswalk bridges in construction located at the second floor
and the fourth floor in between DSH #1 Building and DSH #2 Building.

1.4. “#3 Auxiliary Building” shall mean a three-story building that is currently providing DSH #1
Building and DSH #2 Building with air compressor, vacuum, purified water and emergency generator
supports.

1.5. “#4 Auxiliary Building” shall mean a new three-story building in construction, located at the
north side of the existing #3 Auxiliary Building, that will be providing DSH #2 Building with air
compressor, vacuum, purified water and emergency generator supports.

1.6. “Total Lease Area” shall mean the total lease areas of the entire DSH #2 Building, the two
Skyway Bridges and the #4 Auxiliary Building.

1.7. “Actual Area” either shall mean the government certified actual building area measurement of
the areas of DSH #2 Building and the #4 Auxiliary Building or shall mean two Skyway Bridge’s final
measured actual areas approved in writing by both Parties.

2. Total Lease Area And Other Facilities

2.1. Yuan Howe shall deliver DSH #2 Building, the two Skyway Bridges and the #4 Auxiliary Building
to DSH in compliance with the basic standard quality. Yuan Howe shall obtain from all necessary
government authority checked and accepted inspection certificates. Yuan Howe further guarantees it
is the legal and rightful owner of the DSH #2 Building, the two Skyway Bridges, the #4 Auxiliary
Building and warrants that the quality of the materials used in constructing the DSH #2 Building,
the two Skyway Bridges,

 

 

 the #4 Auxiliary Building and all other accessories shall meet DSH’s and
relevant inspection’s requirements.

2.2. DSH and Yuan Howe further agree to sign another agreement governing the quality and contents
of the Total Lease Area’s current and future interior designs, interior modifications, safety
regulations, manufacturing regulations, and other relevant issues.

2.3. Yuan Howe shall construct two Skyway Bridges between DSH #1 Building and DSH #2 Building. Two
Skyway Bridges will be
located at the second floor and the fourth floor in between DSH #1 Building and DSH #2 Building.

2.4. Yuan Howe shall install four (4) commercial-grade elevators with the capacity of each such
elevator for transport approximately two tons of goods and one (1) regular elevator with the
capacity for transport ten persons or eight hundred kilograms of goods in the DSH #2 Building.
Upon the completion of constructing the DSH #2 Building, Yuan Howe shall have at least two (2)
commercial-grade elevators installed and readied for DSH’s use. Other three elevators should be
installed and readied for DSH’s use depending upon DSH’s overall lease conditions with Yuan Howe.

2.5. Yuan Howe plans to complete the construction of the DSH #2 Building and the #4 Auxiliary
Building in a form completely ready for DSH’s occupancy (not including interiors), including the
completion of each building floor’s major and necessary components, before May 1, 2008. The
construction of two Skyway Bridges must be completed, including all necessary and major components,
in a form completely ready for DSH’s occupancy within sixty (60) calendar days after the
construction completion date of both DSH #2 Building and the #4 Auxiliary Building.

3. Lease Purpose and Use of Goods Manufactured

3.1 Yuan How has inspected DSH’s business operation license and business investment in
manufacturing certificate or the premise for DSH’s business manufacturing operations. DSH’s Total
Lease Area should strictly adhere to government approved perimeters for manufacturing operations,
and DSH should use the Total Lease Area according to its original intended purposes, including its
original intended manufacturing plans and designs, for its intended manufacturing goods.

4. Lease Period

4.1. Both Parties agree that the lease period for the DSH #2 Building, the two Skyway Bridges or
the #4 Auxiliary Building (collectively called the “Lease Period”) shall began after the government
has inspected and issued its approval for the use of each such building structure and after each
such building structure has been completely transferred to DSH for DSH’s occupancy and use. The
Lease Period shall end on January 31, 2013.

4.2. Regardless of when DSH #2 Building, the two Skyway Bridges or the #4 Auxiliary Building will
be completed, starting from the actual completion date of the construction of each such building
structure, the DSH #2 Building, the two Skyway Bridges or the #4 Auxiliary Building, in a form
completely ready for DSH’s occupancy and use, DSH shall have thirty-one (31) calendar days as the
lease-free period for DSH’s interior design operation for each such building structure; thereafter,
DSH promises to begin paying Yuan Howe monthly lease fee for the lease of each such building
structure.

 

 

4.3. For general planning purpose and based on DSH’s current business development estimate, DSH’s
planned lease schedule of the DSH #2 Building is stated as follows:

	 	4.3.1.	 	Starting June 1, 2008, DSH shall lease approximately 6,272 square meters. The lease shall
include DSH #2 Building floor 1A lease area of approximately 3,117 square meters (the portion
of the 9.35 meters floor height) and DSH #2 Building floor 2 lease area of approximately
3,155 square meters (the portion of the floor height 4.35 meters).
	 
	 	4.3.2.	 	Starting January 1, 2009, DSH shall add an additional lease area of approximately 12,563
square meters, totaling the lease area to approximately 18,835 square meters. The added
lease areas are DSH #2 Building floor 1B of approximately 3,155 square meters (the portion of
the 4.90 square meters floor height), DSH #2 Building floor 3 of approximately 6,272 square
meters, and a portion of DSH #2 Building floor 4 of approximately 3,136 square meters.
	 
	 	4.3.3.	 	Starting January 1, 2010, DSH shall add an additional lease area of approximately 9,408
square meters, totaling the lease area to approximately 28,243 square meters. The added
lease area shall be a portion of DSH #2 Building floor 4 of approximately 3,136 square meters
and DSH #2 Building floor 5 of approximately 6,272 square meters.
	 
	 	4.3.4.	 	If the planned lease schedule as highlighted in Sections 4.3.2. and 4.3.3. is changed based
on the market growth rate and/or other unexpected factors, DSH reserves the right to lease
the required space based on its actual need and the actual lease schedule (DSH reserves the
right to delay occupying any portion of the DSH #2 Building up to three (3) years).

4.4. Starting June 1, 2011 DSH shall pay a lease fee calculated by totaling the entire area of the
DSH #2 Building, which are: floor 1A, floor 1B, floor 2, floor 3, floor 4 and floor 5 including
both occupied and unoccupied portion of these floors of the DSH #2 Building. If, however, the
construction of DSH #2 Building or the #4 Auxiliary Building is not completed before May 1, 2008,
DSH’s lease fee payment for the DSH #2 Building and the #4 Auxiliary Building shall also be
delayed. The delayed lease fee payment period for the DSH #2 Building and the #4 Auxiliary
Building shall be defined as the number of calendar days from May 1, 2008 to the construction
completion date in which DSH #2 Building and the #4 Auxiliary Building are ready for DSH’s
occupancy and use. If the construction of two Skyway Bridges is not completed within sixty (60)
calendar days after the construction completion date of both DSH #2 Building and the #4 Auxiliary
Building, DSH’s lease fee payment for two Skyway Bridges shall also be delayed. The delayed lease
fee payment period for the two Skyway Bridges shall be defined as the number of calendar days from
the end of sixty calendar days after the construction complete date of both DSH #2 Building and the
#4 Auxiliary Building to the construction completion date in which two Skyway Bridges are ready for
DSH’s occupancy and use.

4.5. The Parties agree that the Lease Period for the Total Lease Area shall be terminated without
further extension unless DSH gives written notice of a request to extend such Lease Period not less
than thirty (30) days before the expiration of the Lease Period. Yuan Howe shall not terminate
this Lease Agreement without DSH’s written approval. During the extension period of the Lease
Period, various items and lease fees stated in Section 6 of this Lease Agreement may be adjusted on
the basis of the market prices after consultation between the Parties.

4.6. If during the Lease Period Yuan Hao receives from a third party a bona fide, legally binding
offer to lease any portion of the

 

 

Actual Area that has not already leased by DSH, Yuan Howe shall
notify DSH of this fact. Yuan Howe’s notice shall specify all the terms of the bona fide third
party offer. DSH shall then have thirty (30) days to lease that portion of the Actual Area that
has not already leased by DSH but has been specified in the third party’s bona fide offer. Yuan
Howe shall not lease any such portion of the Actual Area to any third party until the thirty (30)
day period has expired without DSH exercising its right of first refusal. Any other necessary
terms and conditions not specified in this Lease Agreement, both Parties shall negotiate and sign a
supplemental agreement for such unspecified terms and conditions. Such signed supplemental
agreement shall constitute a part of this Lease Agreement and
shall have the same effectiveness as this Lease Agreement.

5. Total Lease Area

5.1. DSH #2 Building has a total lease area of approximately 28,243 square meters and a total
height of approximately 24 meters (including the parapet with approximate height of 1.20 meters).
These areas include the following:

a) floor 1A is approximately 3,117 square meters and height is approximately 9.35 meters;

b) floor 1B is approximately 3,155 square meters and height is approximately 4.90 meters;

c) floor 2 is approximately 3,155 square meters and height is approximately 4.35 meters;

d) floor 3 is approximately 6,272 square meters and height is approximately 4.35 meters;

e) floor 4 is approximately 6,272 square meters and height is approximately 4.35 meters;

f) floor 5 is approximately 6,272 square meters and height is approximately 4.35 meters.

5.2. The total lease area of two Skyway Bridges is approximately 100 square meters. Each Skyway
Bridge is approximately 50 square meters.

5.3. The total lease area of #4 Auxiliary Building is approximately 600 square meters. Each floor
of the #4 Auxiliary Building is approximately 200 square meters.

5.4. The Total Lease Area is approximately 28,943 square meters, which includes lease areas of DSH
#2 Building, two Skyway Bridges and the #4 Auxiliary Building.

5.5. Once the government’s local real estate department completed the final certification and
actual measurement procedures and produced the certification showing the Actual Area measurement of
the Total Lease Area, the lease areas of the DSH #2 Building and the #4 Auxiliary Building must be
adjusted according to the government certified Actual Area measurement. The Actual Area of two
Skyway Bridges shall be measured by Yuan Howe and be determined upon both Parties’ final
negotiation and approval.

6. Lease Fees

6.1. Regarding the DSH #2 Building floor 1A, both Parties agree that the monthly lease per square
meter for the floor 1A shall be Renminbi (“RMB”) 39.11 per square meter. The total monthly
lease for DSH #2 Building floor 1A shall be RMB 121,905.87.

6.2. Regarding all other floors of DSH #2 Building except floor 1A, both Parties agree that
the monthly lease per square meter for

 

 

 these floors shall be RMB 26.07 per square meter.
The total monthly lease for all other floors of DSH #2 Building except floor 1A shall be RMB
655,034.82.

6.3. Regarding two Skyway Bridges, both Parties agree that the monthly lease per square meter for
both Skyway Bridges shall be RMB 52.14. The total monthly lease for both Skyway Bridges
shall be RMB 5,214.

6.4. Regarding the #4 Auxiliary Building, both Parties agree that the monthly lease per square
meter for the #4 Auxiliary Building shall be RMB 26.07. The total monthly lease for the #4
Auxiliary Building shall be RMB 15,642.00.

6.5. Both Parties agree that the total monthly lease for the Total Lease Area shall be RMB
797,796.69.

6.6. Only upon the completion of construction of the DSH #2 Building and the #4 Auxiliary Building
in a form completely ready for DSH’s occupancy and use (not including interior designs), including
the completion of all building floors’ major and necessary components, before May 1, 2008
and the completion, including all necessary and major components, of construction of two
Skyway Bridges before July 1, 2008 in a form completely ready for DSH’s occupancy and use, should
the following sections 6.6.1. and 6.6.2. become valid and enforceable:

	 	6.6.1.	 	Starting June 1, 2008 and for every year onward, both DSH and Yuan Howe shall each bear 50%
of the lease fee for any DSH unoccupied portion of the Total Lease Area until the Total Lease
Area has been completed occupied by DSH (“DSH-Yuan Howe Share Lease Fee Structure”).
	 
	 	6.6.2.	 	If the construction of the DSH #2 Building and the #4 Auxiliary Building is delayed or not
completely finished to be occupied (not including interior designs) before May 1, 2008
or the construction of two Skyway Bridges is delayed or not completely finished to be
occupied before July 1, 2008, then the starting date for the above section 6.6.1. on DSH-Yuan
Howe Share Lease Fee Structure shall also be delayed by the number of calendar days from May
1, 2008 to the construction completion date in which DSH #2 Building, the two Skyway Bridges
and the #4 Auxiliary Building are ready for DSH’s occupancy and use.

7. Deposit and Other Fees

7.1. DSH shall pay Yuan Howe a deposit amount of RMB 797,796.69 (“Security Deposit”), equal
to the Total Lease Area’s one-month lease fee, within one hundred and eighty (180) calendar days of
the Effective Date of this Lease Agreement.

7.2. Yuan Howe, upon receiving the Security Deposit, shall issue an evidentiary receipt of the
Security Deposit to DSH. Upon the termination of this Lease Agreement, Yuan Howe shall return the
Security Deposit to DSH minus any portion of fees and/or expenses of DSH as specified in this Lease
Agreement.

 

 

7.3. Building Management Fee DSH agrees to pay Yuan Howe Building Management Fee equivalent to the amount of 5% of the
total monthly lease for the Total Lease Area referred above at Section 6.5.

Yuan Howe shall provide DSH management services as follows:

	(1)	 	guard and security services for the public area outside of the Total Lease Area;
	 
	(2)	 	maintenance and repairs of buildings and facilities in the Total Lease Area;
	 
	(3)	 	maintenance and repairs of public buildings and areas and public facilities within the Total
Lease Area;
	 
	(4)	 	maintain cleanliness and sanitation in the Total Lease Area and any public facilities and
areas;
	 
	(5)	 	maintain landscaping and environment in the Total Lease Area and any public facilities and
areas; and
	 
	(6)	 	provide other necessary building management services.

7.4. Ground Lease Fee

Both Parties agree, upon the Effective Date of this Lease Agreement, that DSH shall pay the ground
lease fee for the full 6,688.07 square meters of gross area related to the Total Lease
Area. Each square meter shall cost RMB 4.13, and the total monthly ground lease fee shall
be RMB 27,621.73.

8. Method of Payment

8.1. Except the first month of the Lease Period, DSH shall pay the total monthly lease for the
Total Lease Area and any related fees to Yuan Howe on the first calendar day of every month of the
Lease Period to a RMB bank account as designated by Yuan Howe.

9. Usage Requirements for the Total Lease Area

9.1. Both Parties, upon signing this Lease Agreement, shall specify various manufacturing safety,
fire safety, special safety and security regulations for the Total Lease Area in accordance with
the government’s safety and security regulations.

9.2. During the Lease Period, both Parties guarantee that all facilities and safety equipments in
the Total Lease Area shall operate normally and safely. When Yuan Howe is inspecting any
facilities or managing its safety management operations, DSH shall coordinate with Yuan Howe to
complete these tasks. If Yuan Howe discovers any hidden danger or problem with DSH’s manufacturing
operations, Yuan How has the obligation to notify DSH of these hidden dangers or problems and order
DSH to correct these hidden dangers or problems with DSH’s manufacturing operations.

10. Status of the Total Lease Area Upon the Termination of the Lease Agreement

10.1. Except both Parties agree to extend this Lease Agreement, DSH shall return the Total Lease
Area to Yuan Howe within thirty-one (31) calendar days after the termination date of this Lease
Agreement.

 

 

10.2. When DSH returns the Total Lease Area and related lease facilities to Yuan Howe, the Total
Lease Area and related lease facilities should meet its standard usage and be able to be used to
carry out its original intended purpose. Both Parties shall also negotiate and agree to pay any
remaining fees or expenses to be paid by each Party. Except any damage by nature cause, if DSH has
caused any damages to any buildings or facilities in the Total Lease Area, Yuan Howe can demand DSH
to repair the damaged buildings or facilities back to their original condition or demand
compensations for the damages.

11. Termination of the Lease Agreement

11.1. If either Party terminates the Lease Agreement prior to the expiration of the Lease Period
without the consent from the other Party, the Party that terminates the Lease Agreement shall pay
damages to the other Party to compensate for such Party’s actual loss. The amount of damages shall
include, but not be limited to, the reasonable profits, out-of-pocket costs, legal service fees,
court fees, arbitration fees, accounting fees and removal or relocation fees.

12. Insurance and Repair Costs

12.1. During the term of the Lease, Yuan Howe shall purchase and maintain building insurance
coverage to cover any and all casualty damage to the Total Lease Area, and shall be responsible for
repairing all structural damages to the buildings and facilities that are not the result of
improper use by DSH. DSH shall be responsible for all repair costs arising from improper usage of
any buildings and facilities in the Total Lease Area. If Yuan Howe cannot obtain building
insurance, DSH will need to obtain such building insurance for the Total Lease Area, and Yuan Howe
shall reimburse DSH for all costs of such insurance coverage.

12.2. Yuan Howe shall be entitled to inspect the Total Lease Area at reasonable intervals and upon
reasonable notice to DSH. DSH shall provide assistance to allow such inspections.

13. Liability for Breach of the Lease Agreement

13.1. Upon the completion and the delivery of the Total Lease Area to DSH, if any flaws or problems
exist in any of the buildings or facilities in the Total Lease Area, Yuan Howe shall proceed with
the repair and complete such repair within fifteen (15) calendar days of the delivery date of the
Total Lease Area to DSH.

13.2. If DSH violates any provisions in Section 6 of this Lease Agreement and fails to pay the
lease on time then DSH shall pay a penalty at the rate of 0.011% of the total monthly lease for the
Total Lease Area for each day of the payment delay.

13.3. If Yuan Howe breaches Sections 2, 4, 5, 6, 7, 12, 14, and 21 as set forth in this Lease
Agreement, Yuan Howe shall compensate DSH for all of DSH’s losses and damages including
consequential, special, punitive and incidental damages.

 

 

13.4. DSH shall not:

	 	(1)	 	sub-lease any portion of the Total Lease Area or exchange the use of the Total Lease
Area with any third party without Yuan Howe’s prior written consent.
	 
	 	(2)	 	alter the structure of the Total Lease Area or damage any buildings or facilities in
the Total Lease Area without Yuan Howe’s prior written consent.
	 
	 	(3)	 	change this Lease Agreement purpose stipulated by the competent authorities
without Yuan Howe’s consent.

14. Warranties

14.1. Yuan Howe hereby warrants that if any portion of the Total Lease Area is sold to any third
party during the Lease Period or the extended period of the Lease Period, such third party shall be
required to fulfill all obligations of Yuan Howe under this Lease Agreement. If said third party
fails to carry out this Lease Agreement, Yuan Howe shall compensate DSH for all of DSH’s losses and
damages including consequential, special, punitive and incidental damages.

14.2. In case Yuan Howe mortgages any portion of the Total Lease Area to the third party, any loss
suffered by DSH shall be paid by Yuan Howe.

15. Force Majeure

15.1. The definition of Force Majeure

Force Majeure shall mean any event which arises after the Effective Date that is beyond the control
of the Parties, and is unforeseen, unavoidable and insurmountable, and which prevents total or
partial performance by either Party. Such events shall include earthquakes, typhoons, flood, fire,
war, acts of government or public agencies, strikes and ay other event which cannot be foreseen,
prevented and controlled, including events which are recognized as Force Majeure in general
international commercial practice.

15.2. Consequences of Force Majeure

a. If an event of Force Majeure occurs, the contractual obligation of a Party affected by such an
event shall be suspended during the period of delay and the time for performing such obligation
shall be extended, without penalty, for a period equal to such suspension.

b. The Party claiming Force Majeure shall give prompt notice to the other Party in writing and
shall furnish, within fifteen (15) days thereafter, sufficient proof of the occurrence and expected
duration of such Force Majeure. The Party claiming Force Majeure shall also use all reasonable
efforts to mitigate or eliminate the effects of the Force Majeure.

c. If an event of Force Majeure occurs, the Parties shall immediately consult with each other in
order to find an equitable solution and

 

 

shall use all reasonable efforts to minimize the
consequences of such Force Majeure.

16. Effective Date of the Lease Agreement

16.1. This Lease Agreement shall become effective after the legal representatives or authorized
representatives of both Parties affix their signatures and company seals on the Lease Agreement.

17. Language of the Lease Agreement

17.1. The Lease Agreement is made and executed in Chinese and English, both versions having equal
validity except as otherwise prohibited under the law.

18. Settlement of Dispute

18.1. Friendly consultations

a. In the event of any dispute, difference, controversy or claim arising out of or related to the
Lease, including, but not limited to, any breach, termination or validity of this Lease Agreement,
(the “Dispute”) then upon one Party giving the other Party notice in writing of the Dispute (the
“Notice of Dispute”), the Parties shall attempt to resolve such Dispute through friendly
consultation.

b. If the Dispute has not been resolved through friendly consultations with thirty (30) days from
the Notice of Dispute, the Dispute shall be resolved by arbitration in accordance with Section
18.2. of this Lease Agreement. Such arbitration may be initiated by either Party.

18.2. Arbitration

The arbitration shall be conducted by Shanghai Arbitration Commission in Shanghai, China in
accordance with its procedure and rules. The arbitration award shall be final and binding on the
Parties. The costs of arbitration shall be borne by the losing Party except as may be otherwise
determined by the arbitration tribunal.

18.3. Continuance of performance

Except for the matter in Dispute, the Parties shall continue to perform their respective
obligations under this Lease Agreement during any friendly consultations or any arbitration
pursuant to this Section 18.

 

 

18.4. Separability

The provisions of this Section 18 shall be separable from the other terms of this Lease Agreement.
Neither the terminated nor the invalidity of this Lease Agreement shall affect the validity of the
provisions of this Section 18.

19. Applicable Law

19.1. The validity, interpretation and implementation of this Lease Agreement and the settlement of
Disputes shall be governed by
relevant PRC laws and regulations that are officially promulgated and publicly available.

20. Compliance with the Foreign Corrupt Practices Act

20.1. Yuan Howe acknowledges that DSH is a corporation with substantial presence and affiliation in
the United States and, as such, is subject to the provisions of the Foreign Corrupt Practices Act
of 1977 of the United States of America, 15 U.S.C. §§ 78dd-1, et seq., which prohibits the making
of corrupt payments (the “FCPA”). Under the FCPA, it is unlawful to pay or to offer to pay anything
of value to foreign government officials, or employees, or political parties or candidates, or to
persons or entities who will offer or give such payments to any of the foregoing in order to obtain
or retain business or to secure an improper commercial advantage.

20.2. Yuan Howe further acknowledges that it is familiar with the provisions of the FCPA and hereby
agrees that Yuan Howe shall take or permit no action which will either constitute a violation
under, or cause DSH to be in violation of, the provisions of the FCPA.

21. Open Terms

21.1. This Lease Agreement contains certain open terms including, but not limited to, Sections 4,
5, 6, 7 and related terms concerning the Actual Area of the Total Lease Area, the total monthly
lease of the Total Lease Area, the Security Deposit and other related fees and expenses. Both
Parties must wait until the government certifies the Actual Area of the Total Lease to be able to
calculate and obtain the correct total monthly lease of the Total Lease Area, the Security Deposit
and other related fees and expenses. Then both Parties shall be able to further negotiate and
determine the final terms in these above-mentioned Sections of the Lease Agreement and sign the
final Lease Agreement.

22. Miscellaneous

22.1. Any amendment to this Lease Agreement shall be in writing and duly signed by both Parties.
Such Amendment shall constitute a part of this Lease Agreement.

22.2. Both Parties acknowledge that they are aware of their respective rights, obligations and
liabilities and will perform their obligations under this Lease Agreement in accordance with the
provisions of the Lease Agreement. If one Party violates this Lease Agreement, the other Party
shall be entitled to claim damages in accordance with this Lease Agreement.

 

 

22.3. Any notice or written communication requited or permitted by this Lease Agreement shall be
made in writing in Chinese and English and sent by courier service. The date of receipt of a
notice or communication shall be deemed to be seven (7) days after the letter is deposited with the
courier service provided the deposit is evidenced by a confirmation receipt. All notice and
communications shall be sent to the appropriate address set forth below, until the same is changed
by notice given in writing to the other Party.

To: DSH

Address: No.1 Lane 18 San Zhuang Road, Songjiang Export Processing Zone,
Shanghai, P.R.China

Attn.: Shanghai Kai Hong Technology Co., Ltd.

To: Yuan Howe

Address: No.8 Lane 18 San Zhuang Road, Songjiang Export Processing Zone,
Shanghai, P.R.China

Attn.: Shanghai Yuan Howe Electronic Co., Ltd.

22.4. This Lease Agreement comprises the entire understanding between the Parties with respect to
its subject matters and supersedes any previous or contemporaneous communications, representations,
or agreements, whether oral or written. For purposes of construction, this Lease Agreement will be
deemed to have been drafted by both Parties. No modification of this Lease Agreement will be
binding on either Party unless in writing and signed by an authorized representative of each Party.

	 	 	 
	Party A: Shanghai Kai Hong

	 	Party B: Shanghai Yuan Howe Electronic
	 
	 	 
	Technology Co., Ltd.

	 	Co., Ltd.
	 
	 	 
	Representative:

	 	Representative:
	 
	 	 
	Date:

	 	Date:EX-10.1

Exhibit 10.01

KEITHLEY INSTRUMENTS, INC.

2009 Annual Incentive Compensation Plan

Introduction 

          Keithley Instruments, Inc. (the “Company”) has established an Annual Incentive Compensation
Plan (the “Plan”) as part of a competitive compensation program for the officers and key management
employees of the Employers (as defined below). This Plan is also referred to as the Short-Term
Incentive Compensation Plan.

Plan Objective 

          The Company desires to attract, retain and incent talented employees to enable the Company to
meet its financial and business objectives. The objective of the Plan is to provide an opportunity
to those employees whose performance has a significant impact on the Company’s short-term and
long-term profitability to earn annual incentive compensation based on such profitability.

Administration 

          The Plan is administered by the Compensation and Human Resources Committee of the Board of
Directors of the Company (the “Committee”). The Committee:

	a.	 	May amend, modify, or discontinue the Plan.
	 
	b.	 	Will designate Plan Participants at the officer level.
	 
	c.	 	Will review and approve the annual performance criteria.
	 
	d.	 	Will approve individual incentive compensation Awards to Participants who are officers.
	 
	e.	 	Delegates to the Chief Executive Officer of the Company the power to designate Plan
Participants and approve incentive compensation Awards to Participants who are not officers.
	 
	f.	 	Except as determined by the Committee, a Participant must be employed on September 30 of the
Award Term in order to be entitled to receive an Award hereunder. Notwithstanding the
foregoing, the Committee may approve a pro rata incentive compensation Award for Participants
who terminate employment prior to September 30 of the Award Term, provided those Participants
were actively at work for the first one hundred and eighty days in the Award Term and (1)
whose employment is terminated due to death, Disability, Retirement or (2) at the
recommendation of the Chief Executive Officer.

          The Committee shall have complete authority to interpret all provisions of this Plan
consistent with law, to prescribe the form of any instrument evidencing any Award granted or paid
under this Plan, to adopt, amend and rescind general and special rules and regulations for its
administration, and to make all other determinations necessary or advisable for the administration
of this Plan. A majority of the Committee shall constitute a quorum, and the action of members of
the Committee present at any meeting at which a quorum is present or acts unanimously approved in
writing by all Committee members, shall be the act of the Committee. All acts and decisions of the
Committee with respect to any questions arising in connection with the administration and
interpretation of this Plan, including the severability of any or all of the provisions hereof,
shall be conclusive, final and binding upon the Company and all present and former Participants and
employees and their respective descendants, successors and assigns. No member of the Committee
shall be liable for any such act or decision made in good faith.

Determination of Individual Incentive Compensation Awards 

          Target incentive percentage for each Participant in the Plan will be established at the
beginning of each Award Term and approved by the Committee, if required, or the Chief Executive
Officer in cases where he has been delegated power by the Committee and will be established with
consideration of competitive market data. Individual target incentive compensation will be
calculated at the end of the Award Term based on performance against the criteria. Individual
incentive compensation may then be further modified based on a Participant’s performance and
contributions for the year by up to 25% either plus or minus of target payout. If a Participant’s
performance during the Award Term is determined to be unsatisfactory, the Committee, or the Chief
Executive

 

 

Officer in the case of non-officers, reserves the right to reduce the Participant’s Award for
the Award Term to zero. Individual incentive compensation Awards may not exceed two (2) times the
Target Incentive Award.

Payment Date/Taxes

          Promptly following the Committee’s or the Chief Executive Officer’s approval, as appropriate,
of the final Awards, the Participants’ Employer shall pay the amount of such Awards to the
Participants in cash, subject to all withholdings and deductions described in the following
sentence; provided, however, that (i) no Award shall be payable to a Participant except as
determined by the Committee or the Chief Executive Officer, as appropriate and (ii) and Awards
earned during the Award Term shall be paid during the period from October 1st through
December 15th of the fiscal year following the Award Term provided that no valid
deferral election has been previously made by the Participant. Any Award paid to a Participant
under this Plan shall be subject to all applicable foreign, federal, state and local income tax,
social security and other standard withholdings and deductions.

Definitions

          (a) “Award” means cash paid to a Participant under the Plan for the applicable Award Term in
an amount determined in accordance with the Plan.

          (b) “Award Term” means the period corresponding with the Company’s fiscal year beginning
October 1 through the following September 30. The initial Award Term is October 1, 2008 through
September 30, 2009.

          (c) “Disability” means an approved application for disability benefits under an Employer’s
long term disability plan or under any applicable government program.

          (d) “Employer” means each of the Company and its wholly owned subsidiaries, as applicable.

          (e) “Participant” means any person who is classified by an Employer as a salaried employee who
in the judgment of the Committee or the Chief Executive Officer, as appropriate occupies a key
position in which his efforts may significantly contribute to the profits or growth of the Company;
and provided that following the end of the Award Term the Committee, or the Chief Executive
Officer, as appropriate, may make one or more discretionary Awards to employees of an Employer who
were not previously designated as Participants. Directors of the Company or an Employer who also
are employees of the Company are eligible to participate in the Plan. The Committee, or the Chief
Executive officer in the case of a non-officer Participant, shall have the power to add
Participants at any later date in the Award Term if individuals subsequently become eligible to
participate in the Plan. Each Participant shall be notified that he is eligible to receive an
Award and the amount of his target Award. All target awards are based the salary in effect on
October 1 of the applicable Award Term, or in the case of a Participant added to the Plan at a
later date his starting salary or then current salary.

          (f) “Retirement” means a termination of employment with the Company or any Employer at or
after age 55 and the completion of 10 or more years of service with the Company or any Employer.

General Plan Provisions

          (a) No Right of Employment. Neither the adoption or operation of this Plan, nor any
document describing or referring to this Plan, or any part thereof, shall confer upon any employee
any right to continue in the employ of the Employer, or shall in any way affect the right and power
of an Employer to terminate the employment of any employee at any time with or without assigning a
reason therefor to the same extent as the Company might have done if this Plan had not been
adopted.

          (b) Governing Law. The provisions of this Plan shall be governed by and construed in
accordance with the laws of the State of Ohio.

          (c) Miscellaneous. Headings are given to the sections of this Plan solely as a
convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any
case be deemed in any way material or relevant to the construction of this Plan or any provisions
thereof. The use of the masculine gender shall also

2

 

include within its meaning the feminine. The use of the singular shall also include within
its meaning the plural, and vice versa.

          (d) American Jobs Creation Act. It is intended that this Plan be exempt from the
requirements of Section 409A of the Internal Revenue Code, as enacted by the American Jobs Creation
Act.

          (e) Limitation on Rights of Participants; No trust. No trust has been created by the
Company or any Employer for the payment of Awards granted under this Plan; nor have the
Participants been granted any lien on any assets of the Company or any Employer to secure payment
of such benefits. This Plan represents only an unfunded, unsecured promise to pay by the Company
and a Participant hereunder is a mere unsecured creditor of his Employer.

          (f) Payment to Guardian. If an Award is payable to a minor, to a person declared
incompetent or to a person incapable of handling the disposition of his property, the Committee may
direct payment of such Award to the guardian, legal representative or person having the care and
custody of such minor, incompetent or person. The Committee may require such proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate prior to the
distribution of such Award. Such distribution shall completely discharge the Employers from all
liability with respect to such Award.

          (g) Effective Date. This Plan shall become effective as of October 1, 2008.

Performance Targets

          The performance targets for the Plan are attached as an Addendum to this document.

3

 

Addendum

FY2009 Performance Targets(1)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Metric	 	 	Threshold	 	 	Target	 	 	Maximum	 
	 	ROA(2)

	 	 	 	18%	 	 	 	 	26%	 	 	 	 	48.5%	 	 
	 	Consolidated Net Sales(3)

	 	 	$	150M	 	 	 	$	168M	 	 	 	$	195M	 	 
	 

	(1)	 	The Annual Bonus Plan caps the individual performance measures at 2.5x Target and
further caps an individual’s payout at 2 times the individual’s target incentive award.
	 
	(2)	 	ROA for purposes of the Annual Bonus Plan is defined as Earnings Before
Taxes(a)(EBT) excluding non-cash compensation and annual bonus expenses and net
interest/expense ÷ average assets employed (accounts receivable + inventories + net
property plant and equipment at the end of each month of the fiscal year divided by 12).
	 
	(3)	 	No payout will be made on Consolidated Net Sales measure if ROA is below 10%.
	 
	(a)	 	For purposes of calculating ROA, certain charges may be excluded from the calculation
with the approval of the Compensation Committee.
	 
	 	 	The bonus is calculated as the sum of (1) the ROA component using actual ROA in the schedule
attached as Exhibit A and (2) the Consolidate Net Sales using the Net Sale in the schedule
attached as Exhibit A.

4

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