China Automotive Systems, Inc. (NASDAQ:CAAS) Files An 8-K Entry into a Material Definitive Agreement

China Automotive Systems, Inc. (NASDAQ:CAAS) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into A Material Definitive Agreement

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On April 27, 2018, Hubei Henglong Automotive System Group Co., Ltd. (“Henglong”), a wholly-owned subsidiary of China Automotive Systems, Inc., a Delaware corporation (the “Company”), entered into a joint venture contract (the “JV Contract”) with KYB (China) Investment Co., Ltd. (“KYB China”), to which the parties will establish a joint venture company, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd. (the “JV Company”) under the laws of the People’s Republic of China, for the purpose of manufacturing and sales of automotive electric steering systems (“EPS”) and other automotive parts. The target markets of the JV Company’s products will be China and overseas markets excluding the Japanese market and the markets in other countries or regions to which KYB China and its affiliates have supplied products.

to the JV Contract, the total investment amount of the JV Company is RMB960 million and its registered capital is RMB320 million. Henglong and KYB China will contribute RMB213.12 million in cash and in kind and RMB106.88 million in cash to the registered capital of the JV Company, respectively, and they will make such capital payment within ninety (90) days from the establishment date of the JV Company (the “Establishment Date”). If a party fails to pay its due capital contribution within thirty (30) days after the expiration of the 90-day period, the other party shall be entitled to terminate the JV Contract unilaterally or pay the unpaid part of the contribution.

After the parties have paid their respective capital contribution to the JV Company, the JV Company will be owned as to 66.6% and 33.4% by Henglong and KYB China, respectively.

to the JV Contract, each of Henglong and KYB China shall, on its own or procure its affiliates to provide the JV Company with the right to use its technology and provide the JV Company with the technical assistance and training related to production and equipment operation as required by the JV Company. Henglong shall procure its wholly-owned subsidiary Jingzhou Henglong Auto Parts Manufacturing Co., Ltd. (“Jingzhou Henglong”) to transfer all of its owned EPS business in the Chinese market to the JV Company within sixty (60) days from the Establishment Date. Henglong shall ensure that it will, or will assist its affiliates to, provide necessary assistance and support to the JV Company for its operations. Henglong shall procure Jingzhou Henglong to enter into house tenancy agreement with the JV Company to lease the production plant to the JV Company. KYB China shall procure that its parent company KYB Corporation of Japan transfer all of its own EPS business in the Chinese market to the JV Company, including the potential businesses that are being negotiated with the customers, within sixty (60) days from the Establishment Date. KYB China shall take necessary actions for the JV Company to take over the contracts related to the EPS business in the Chinese market between KYB Corporation of Japan (or its affiliates) and their customers, suppliers and other counterparties, and KYB China shall do its utmost to achieve the takeover. KYB China and/or its affiliates shall provide the necessary assistance and support to the JV Company for its operations.

to the JV Contract, the parties have agreed to set up a board of directors on the Establishment Date, which will consist of five directors. Of the five directors, three will be appointed by Henglong with one of them as the chairman of the board of directors, and two will be appointed by KYB China with one of them as the vice chairman of the board of directors. The chairman of the board of directors will be the legal representative of the JV Company. The JV Company will have two supervisors and each of Henglong and KYB China shall be entitled to appoint one supervisor.

A party may not transfer its shareholding in the JV Company without the other party’s consent, and the other party shall have a right of first refusal to purchase the shareholding from the selling party with a price and other terms and conditions no less favorable than that offered by a third party; provided that the other party shall unconditionally agree to waive its right of first refusal if the selling party is transferring all or part of its shareholding in the JV Company to its affiliates.

The term of the JV Contract is twenty (20) years from the Establishment Date, subject to extension by the approval of the board of directors of the JV Company and the approval of the relevant governmental authorities. The JV Contract may be terminated with a written notice upon the occurrence of events including a party’s bankruptcy proceedings, material breach irremediable or material breach by a party not remedied within sixty (60) days after a written notice requesting remedy is issued by the non-breaching party, the purpose of the JV Contract cannot be achieved due to illegality, invalidity or unenforceability of any provision and concerning which an agreement on the revision cannot be agreed upon, or upon the mutual agreement of the parties.

The JV Contract and the transaction contemplated thereunder were approved by the written consent of the board of directors of the Company on March 28, 2018.

The foregoing description of the JV Contract is only a summary and is qualified in its entirety by reference to the JV Contract, an English translation of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits
(d) Exhibits

To view the full exhibit click here

About China Automotive Systems, Inc. (NASDAQ:CAAS)

China Automotive Systems, Inc., (China Automotive) is a holding company. The Company, through its subsidiary, Great Genesis Holdings Limited (Genesis), owns interests in over eight Sino-joint ventures and over five subsidiaries in the People’s Republic of China (PRC), which manufacture power steering systems and/or related products for various segments of the automobile industry. Genesis also owns interests in a Brazil-based trading company, which engages mainly in the import and sales of automotive parts in Brazil. Henglong USA Corporation (HLUSA), which is a subsidiary of the Company, engages in marketing of automotive parts in North America, and provides after sales service and research and development support. The Company’s geographical segments include the United States, China and other foreign countries. One of its subsidiaries, Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., focuses on power steering parts for light duty vehicles.

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