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Exhibit 10.2, Compensation Trade Agreement for SOT-23 Product,
constitutes a fair and accurate English translation of the exhibit.
DIODES INCORPORATED (Registrant)
/s/ Joseph Liu
- --------------------------
JOSEPH LIU October 25, 1995
Vice President, Secretary
and Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT 10.2
COMPENSATION TRADE AGREEMENT FOR SOT-23 PRODUCT
(TRANSLATED FROM CHINESE)
This Agreement is made between Diodes Incorporated (hereafter referred
to as Diodes), located at 3050 East Hillcrest Drive, Westlake Village,
California 91361-3154, U.S.A. and Shanghai Kai Hong Electronics Co., Ltd.
(hereafter referred to as Kai Hong), located at No. 61 Xinnan Road, Xinqiao
Town, Songjian, Shanghai, China 201612. Owing to the market demand, the
parties hereby agree to cooperate in the production of SOT-23 products (1)
(hereafter referred to as Products) under the terms and conditions below:
I. Way of Cooperation:
1. The parties agree to set up a SOT-23 Products production line
in Shanghai. (2)
2. Diodes shall invest capital for acquisition of equipment and
Kai Hong shall invest capital for the acquisition of
equipment, for the construction of a factory building, for
technical training and for working capital. Total investment
amounts are subject to the actual cost of acquisition of
equipment, but not to exceed amount specified on the
attachment. (3)
3. Kai Hong is responsible for start up and will take charge of
management and production. The capital invested by Diodes
will be repaid by means of Products exported on compensation
trade basis.
II. Contents of Compensation Trade:
1. Diodes shall assist in securing qualified chip suppliers and
provide product specifications to entrust Kai Hong to produce
SOT-23 Products to export to Diodes. For the payment of
production to Kai Hong , Diodes shall deduct a portion to
repay Diodes' investment. (5)
2. Kai Hong guarantees to sell its monthly production of Products
to Diodes. Any excess Products shall be handled subject to
mutual negotiation, which may include domestic sale and
export. (4)
3. The fall-off and scrap parts shall be kept in good custody.
The quantity shall be confirmed by both parties before
disposal.
* CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
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4. Kai Hong shall adopt rigid production management. Except for
reasonable production consumption if there is a loss of
finished Products and Work-In-Progress Products, Kai Hong
agrees to make up the monthly capacity under the agreement.
If there is a cost variable due to such a loss, it shall not
be included when reviewing the cost structure. Kai Hong shall
agree to take effective action to prevent such a loss within
three months of learning of it.
II. Quality Standard:
1. The chips provided by suppliers recommended by Diodes shall
comply with requirements of Kai Hong quality and production
requirements.
2. Kai Hong shall carry out the production upon the request of
Diodes. The yield for initial production will be mutually
agreed upon and a review shall be conducted once each half
year for adjustment subject to actual condition. (6)
3. The finished Products delivered to Diodes shall comply with
the quality standard and product specifications defined by
Diodes.
IV. Supply, Production, Product Packaging and Delivery Terms:
1. SUPPLY: The purchase of chips shall be of good quality and
reasonable cost under mutual agreement. During the initial
period of production, Kai Hong shall purchase chips from
qualified suppliers that have been recommended by Diodes or
smooth production. Unless supplies are interrupted due to
force majeure, Diodes shall be responsible for the
compensation of loss caused to Kai Hong during the period of
production interrupted for the labor and depreciation cost.
During the first year, Kai Hong and Diodes should jointly
develop more qualified chip suppliers. After one year of
formal production, Kai Hong shall be responsible for the
purchase of chips while Diodes may continue to help Kai Hong
secure the chips sourcing necessary for monthly production.
Mutual consent is required of both parties for a change or
increase of chip suppliers.(7)
2. PRODUCTION: Upon receipt of chips, Kai Hong shall commence
production immediately, and the production cycle shall be
about 30 days.
3. PACKAGING: 3000 pieces/reel, 5 reels/box, 12 boxes/carton
V. Means of Investment and Final Account of Production Compensation:
1. Upon the execution of this agreement, the purchase of
equipment shall be commenced based on the suppliers and
specifications confirmed between both parties. The purchase
of equipment necessary for the company shall be handled by Kai
Hong. Diodes shall remit its investment to Kai Hong's bank
account to maintain timely payment according to the equipment
payment schedule.
2. SOT-23 produced by Kai Hong shall be priced competitively for
export to Diodes (based on MMBT 3094/3906) of which a portion
is compensation expense (as reimbursement on loan and
interest) and actual remaining payment
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shall be made by Diodes to Kai Hong within 30 days by T/T in
US$. Actual export price shall be reviewed once ever half
year by both parties. (5)
3. The feasibility study of this item shall be acknowledged by
the parties with their signature affixed. The offset price
shall be adjusted when key material price has a major change
(defined as +/-3%).
4. The interest on the capital to be invested by Diodes shall be
calculated based on the actual interest rate charged by
Diodes' bank. Interest will start from the date Kai Hong
received the remittance. The quantity of product by
compensation trade will be made over 58 months. (8)
5. The freight charges from the shipment of chips to Kai Hong
will be charged to Kai Hong's account and the freight charge
occurring from the shipment of Product to Diodes from Kai
Hong will be charged to Diodes .
6. When there is significant change to the specification of
SOT-23 Products and/or related Products, the export price and
compensation expense will be changed by to mutual agreement.
7. All Product will meet Diodes quality requirements and
standards as shown on Appendix.
8. Should Kai Hong liquidate or be closed due to other cause(s)
prior to Diodes' loan and interest being fully repaid, Diodes
shall have the ownership of the equipment equivalent to the
sum not repaid and have the highest priority of debt claim
against the bank with relation to Kai Hong.
9. During the effective period of this agreement, each party
shall obtain the other party's written consent prior to
speaking with a third party regarding additional investment
plan(s) for same or similar Products. Both parties agree that
the other party shall have the right of first refusal under
the same terms and conditions.
10. The agreement shall remain valid until the end of December 31,
2000, or until the date the Products have been delivered as
previously agreed. Kai Hong agrees to give Diodes the
priority of the purchase of additional product for an
additional five years, since the expiration of this agreement,
and the selling price will be reduced from then current market
price. During the extension period, Item V.9 and V.10 herein
will remain valid while other items shall be invalid. (9)
11. During this period of agreement, if there is any dispute
between the parties, it shall be amicably settled by the
parties.
* ( ) All footnotes are herein incorporated in Attachment 1.
DIODES INCORPORATED Shanghai Kai Hong Electronics Co., Ltd.
/s/ David Lin /s/ J.Y. Xing
- -------------------------- ---------------------------------------------------
David Lin, President J. Y. Xing, Chairman of the Board and President
Date: June 9, 1995 Date: June 9, 1995
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ATTACHMENT 1
1. SOT-23 Product Content = Transistor, Switching diode, Zener diode, Schottky
diode, etc.
2. Factory Monthly Capacity Target = Minimum 10,000K units per month.
3. Total Investment = US * (**)
A. Diodes = Not to exceed US * - for acquisition of Equipment
B. 3. Kai Hong Total Investment = US * million
US * - for acquisition of equipment
US * - for the construction of a factory building
US * - for technical training
US * - for working capital
** (Total investment amounts are subject to the actual cost of acquisition of
equipment.)
4. SOT-23 Products Distribution
A. Kai Hong Guarantees Minimum * units per month
B. Excess Production Disbursement
1. Diodes has first right of refusal for excess production at
negotiated prices or
2. Domestic sale and or export subject to * each for
Kai Hong and Diodes
5. SOT-23 Transfer Price
A. Transfer Price to Diodes = US *
B. Payment Deduction to Repay Diodes' Investment = US *
C. Actual Remitted Payment to Kai Hong = *
6. Initial Production Yield = *
7. Initial Kai Hong Chip Purchases = * units per month
8. Quantity of Product for Compensation Trade = Total Diodes loan and
interest to be amortized equal to * ( *)
9. Additional Quantity Available for Purchase at End of Agreement at
December, 2000 = * units per month for * at favorable discount from
market price
* CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
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