EXHIBIT 10.3
JOINT VENTURE PARTNER SUBSTITUTION AGREEMENT
Majority Partner: D.V.S. H.K. Limited ("DVS")
Legal Address: Xxxx 00-00X, Xxxxx 00, Xxxxxxxx Xxxxx, 00 Lung Sum
Avenue, Sheung Shui, New Territories, Hong Kong
Legal Representative: Dr. Edmund Sun
New Minority Partner: Pacific Electrical Manufacturing Co., Ltd. ("Pacific")
Legal Address: Beijing Minzu Hotel, 51 Fuxingmennel Street, Suites
2205-2206, Beijing, China 100031
Legal Representative: Dr. An Yueh Zehan
WHEREAS, DVS and Panyu Tian Le Electrical Manufacturing Co. ("Tian Le")
entered into a Joint Venture Contract in August 1997, pursuant to which the
Panyu D.V.S. Electrical Appliances Manufacturing Co., Ltd. was formed (the
"Joint Venture"); and
WHEREAS, the Joint Venture was initially owned 51% by DVS and 49% by Tian
Le, and in December 1997, DVS purchased from Tian Le its entire 49% interest in
the Joint Venture, with the agreement that Tian Le would hold a 10% interest in
the Joint Venture for the benefit of DVS's new Joint Venture Partner until DVS
had identified a new Joint Venture partner; and
WHEREAS, DVS and Pacific have agreed that Pacific will acquire the 10%
interest in the Joint Venture currently held by Tian Le, subject to the terms
and conditions set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. DVS and Pacific agree that Pacific shall acquire the 10% interest in the
Joint Venture previously held by Tian Le for full consideration of 000 XXX.
(Dr. An agrees to form a company in Panyu, Guangdong province, China to
effectuate such acquisition in accordance with the requirements of Chinese
law.)
2. Pacific's 10% interest in the Joint Venture shall be subject to repurchase
by DVS at any time, at DVS's sole discretion, for an aggregate amount equal
to 000 XXX.
3. Pacific agrees that from the date of this agreement until such time as DVS
has recovered all of its contributed capital from the Joint Venture (in
addition to any profits from operations), DVS shall receive all profits
from the operation of and capital distribution from the Joint Venture
including (a) profits that would otherwise be payable to Pacific as a
return on his 10% interest in the Joint Venture and (b) any return of
Pacific's capital contributed to the Joint Venture (which shall be the
capital contributed by Tian Le).
4. Pacific shall assist DVS in obtaining any required governmental approvals
necessary to complete the substitution of Pacific for Tian Le as DVS's new
Joint Venture partner.
5. DVS shall be entitled to designate all of the directors, the General
Manager and all other personnel for the Joint Venture and to otherwise
direct the management of the Joint Venture.
6. Dr. An is the sole owner of Pacific, which is serving as a Joint Venture
partner, Dr. An shall be appointed the General Counsel for the Joint
Venture during the period that he is a Joint Venture partner. Dr. An shall
not receive any special compensation for his service as General Counsel,
but he shall be entitled to be compensated for his legal services provided
to the Joint Venture at his usual and customary rate or as otherwise agreed
to by Dr. An and the Joint Venture.
7. DVS agrees to pay the costs of completing the substitution of Pacific for
Tian Le.
8. DVS agrees to hold Pacific harmless and free of any obligations, contingent
liabilities, or other costs resulting from any obligations or liabilities
which have accrued, or may accrue from the Joint Venture and its operations
in connection with Pacific's acquisition of the 10% interest in the Joint
Venture formerly held by Tian Le, including without limitation for the
payment of taxes, legal fees or other costs resulting from such
acquisition. Notwithstanding the foregoing, Pacific agrees that Pacific
shall be fully responsible for any obligations, contingent liabilities or
other costs resulting from Pacific's failure to timely make all filings and
obtain all consents required to be filed or obtained by Pacific in
connection with its acquisition of the 10% interest in the Joint Venture.
9. Following the substitution of Dr. An's company "Pacific" for Tian Le as a
10% holder in the Joint Venture, the Joint Venture shall maintain its
current form of organization as a limited liability company and equity
joint venture in accordance with the Law of the People's Republic of China
on Sino-Foreign Equity Joint Ventures and other relevant laws and
regulations of China and the province of Guangdong.
10. All issues not expressly covered by this agreement shall be resolved by
good faith negotiations between the parties. If negotiations are
unsuccessful, any dispute shall be submitted to the China International
Economic and Trade Arbitration Commission for arbitration according to its
provisional rules of arbitration procedure. The arbitration award shall be
final and binding on both parties. The costs of such arbitration
(including reasonable legal fees) shall be borne by the DVS party. During
the arbitration proceeding, this agreement shall continue to be performed
except for the portion which is subject to the dispute under arbitration.
11. All disputes arising in connection with this agreement shall apply the rule
of laws of China.
12. This agreement has been memorialized in both Chinese and English, and each
such version, when duly executed, shall be a valid and binding legal
document. There are two (2) original copies of each version, and each
party shall keep a copy of both the Chinese and the English version.
13. This agreement is binding upon signing by the legal representatives of both
parties.
MAJORITY JOINT VENTURE PARTNER: MINORITY JOINT VENTURE PARTNER
D.V.S. H.K. Limited Pacific Electrical
Manufacturing Co., Ltd.
By: By:
--------------------------- ----------------------------
Name: Name:
Title: Title:
