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Further to the announcement made on 22 July 2005, the Board of Directors of JK Yaming International Holdings Ltd (the "Company") wishes to announce further information regarding the legal suits brought against the Company and its subsidiaries Fujian Juan Kuang Yaming Electric Limited and Anhui Juan Kuang Electric Co. Ltd. (the "Subsidiaries") in the state court of California, U.S.A.
The plaintiffs in the legal suits, Segue Electronics, Inc. and Shine Capacitors, LLC, filed two complaints against the Company and the Subsidiaries. One complaint also named Aerovox, a Division of Parallax Power Components, LLC and Parallax Power Components, LLC as defendants while the other complaint also named Phihong USA Corp. and its parent company Phihong Technology Co., Ltd ("Phihong International") as defendants. Phihong International is a controlling shareholder of the Company. The complaints were filed on 30 June 2005 and the Company became aware of the complaints on the same day. After the complaints became known, the Company sourced for appropriate legal representation and considered several law firms before appointing its U.S. legal counsel on 22 July 2005.
The legal suits arise out of certain alleged agreements between the Company, the Subsidiaries, the other defendants in the complaints, and the plaintiffs. The plaintiffs allege that the agreements appointed the plaintiffs as the Company's exclusive agents and distributors in North America for certain products. The plaintiffs further allege that the Company breached the agreements by purportedly circumventing the agreements, dealing directly with end customers, and failing to pay amounts owed pursuant to the agreements. The plaintiffs seek damages asserting purported claims for breach of contract, injunctive relief, fraud and conspiracy to commit fraud, and declaratory relief.
One of the complaints does not specify the amount of damages sought. The other complaint states that it seeks US$25 million but the complaint does not provide any factual basis to support the claim for that amount. The factual allegations of the complaint refer only to payments amounting to US$140,000 purportedly owed by the Company and/or the Subsidiaries. This same complaint also purports to seek US$50 million in punitive damages. However, the Company has been advised by its U.S. legal counsel that California law prohibits such request for a particular amount of punitive damages. The Company will accordingly file a motion to strike that amount from the complaint.
Following consultation with its U.S. legal counsel, the Company is of the view that the plaintiffs' claims lack merit. Responsive pleadings to the complaints are now in the process of being drafted by legal counsel. The Company anticipates filing responsive pleadings in California state court within the next two to three weeks, in which the Company will deny the allegations made in the complaints against the Company, assert all appropriate affirmative defences, and seek other relief from the court as advised by its legal counsel. The Company also anticipates filing a cross-complaint that asserts affirmative claims against the plaintiffs, including for breach of contract, and will seek damages thereon.
The Board of Directors is of the opinion that the Company has disclosed information pertaining to the legal suits that is sufficient and reasonably expected of the Company at this juncture given the complexity of the issues raised in the complaints and that the Company and its legal counsel are still in the process of obtaining and collating the relevant information, and reviewing and assessing the plaintiffs' allegations and claims.
Pending resolution of the legal suits, shareholders of the Company are advised to exercise caution when dealing in the shares of the Company and to refrain from taking any action in respect of their shares in the Company that may be prejudicial to their interests.
Further announcements concerning the legal proceedings will be made as and when appropriate.
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