o
Confidential,
for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
o
Definitive
Proxy Statement
o
Definitive
Additional
Materials
o
Soliciting
Material Pursuant to
§240.14a-12
China Automotive Systems, Inc.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee required.
o
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1)
Title
of each class of securities to which transaction applies:
2)
Aggregate
number of securities to which transaction applies:
3)
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4)
Proposed
maximum aggregate value of transaction:
5)
Total
fee paid:
o
Fee
paid previously with preliminary materials.
o
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
The
Annual Meeting of Stockholders of China Automotive Systems, Inc. (the “Company”)
will be held on June 26, 2008 (Thursday) at 10 am local time at the Conference
Room of HengLong USA Corporation – CAAS, 1166 E Big Beaver Rd, Troy, MI48083, the United States of America,for
the
following purposes, as more fully described in the accompanying proxy statement:
1.
To approve the issuance of 1,853,542 shares of the Company’s outstanding shares
as the remaining consideration to be paid in connection with the acquisition
of
35.5% equity interest in Jingzhou Henglong Automotive Parts Co., Ltd. by Great
Genesis Holdings Limited, a wholly-owned subsidiary of the Company.
2.
To
elect five directors to hold office until the 2009 Annual Meeting of
Stockholders and until their successors are elected and qualified.
3.
To ratify the appointment of Schwartz Levitsky Feldman LLP as the Company’s
independent auditors for the fiscal year ending December 31, 2008.
4.
To transact such other business as may properly come before the meeting or
any
adjournments or postponements thereof.
Only
stockholders of record at the close of business on May 12, 2008 will be entitled
to notice of, and to vote at, such meeting or any adjournments or postponements
thereof.
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND MAIL
PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL ENSURE THE
PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE
IN
PERSON IF YOU WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY
CARD.
B-1
CHINA
AUTOMOTIVE SYSTEMS, INC.
No.
1
Henglong Road, Yu Qiao Development Zone
Shashi
District, Jing Zhou City, Hubei Province
People's
Republic of China
(86)
716-832 9196
PROXY
STATEMENT
2008
ANNUAL MEETING OF STOCKHOLDERS
China
Automotive Systems, Inc., the “Company”, is furnishing this proxy statement and
the enclosed proxy in connection with the solicitation of proxies by the Board
of Directors of the Company for use at the Annual Meeting of Stockholders to
be
held on June 26, 2008, Thursday, at 10 am local time, at the Conference Room
of
HengLong USA Corporation - CAAS, 1166 E Big Beaver Rd, Troy, MI48083, the
United States of America, and at any adjournments thereof, the “Annual Meeting”.
These materials will be mailed to stockholders on or about May 26,2008.
Only
holders of the Company’s common stock as of the close of business on May 12,2008, the “Record Date”, are entitled to vote at the Annual Meeting.
Stockholders who hold shares of the Company in “street name” may vote at the
Annual Meeting only if they hold a valid proxy from their broker. As of the
Record Date, there were 25,129,702 shares of common stock outstanding.
A
majority of the outstanding shares of common stock entitled to vote at the
Annual Meeting must be present in person or by proxy in order for there to
be a
quorum at the meeting. Stockholders of record who are present at the meeting
in
person or by proxy and who abstain from voting, including brokers holding
customers’ shares of record who cause abstentions to be recorded at the meeting,
will be included in the number of stockholders present at the meeting for
purposes of determining whether a quorum is present.
Each
stockholder of record is entitled to one vote at the Annual Meeting for each
share of common stock held by such stockholder on the Record Date. Stockholders
do not have cumulative voting rights. Stockholders may vote their shares by
using the proxy card enclosed with this proxy statement. All proxy cards
received by the Company, which are properly signed and have not been revoked
will be voted in accordance with the instructions contained in the proxy cards.
If a signed proxy card is received which does not specify a vote or an
abstention, the shares represented by that proxy card will be voted for (i)
the
proposal to approve the issuance of 1,853,542 shares of the outstanding shares
of the Company as the remaining consideration to be paid in connection with
the
acquisition of 35.5% equity interest in Jingzhou Henglong Automotive Parts
Co.,
Ltd. by Great Genesis Holdings Limited, a wholly-owned subsidiary of the
Company, for a total consideration of US$32,090,000, (ii) the nominees to the
Board of Directors listed on the proxy card and in this proxy statement and
(iii) the ratification of the appointment of Schwartz Levitsky Feldman LLP
as
the Company’s independent auditors for the fiscal year ending December 31, 2008.
The Company is not aware, as of the date hereof, of any matters to be voted
upon
at the Annual Meeting other than those stated in this proxy statement and the
accompanying Notice of Annual Meeting of Stockholders. If any other matters
are
properly brought before the Annual Meeting, the enclosed proxy card gives
discretionary authority to the persons named as proxies to vote the shares
represented by the proxy card in their discretion.
Under
Delaware law and the Company’s Certificate of Incorporation and Bylaws, if a
quorum exists at the meeting, the affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked “Withhold authority” with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether
there
is a quorum. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote
on
the item will be required for approval. A properly executed proxy marked
“Abstain” with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly,
an
abstention will have the effect of a negative vote.
C-1
For
shares held in “street name” through a broker or other nominee, the broker or
nominee may not be permitted to exercise voting discretion with respect to
some
of the matters to be acted upon. Thus, if stockholders do not give their broker
or nominee specific instructions, their shares may not be voted on those matters
and will not be counted in determining the number of shares necessary for
approval. Shares represented by such “broker non-votes” will, however, be
counted in determining whether there is a quorum.
A
stockholder of record may revoke a proxy at any time before it is voted at
the
Annual Meeting by (a) delivering a proxy revocation or another duly
executed proxy bearing a later date to Mr. Li Jie, the Secretary of the Company,
at No. 1 Henglong Road, Yu Qiao Development Zone, Shashi District, Jing Zhou
City, Hubei Province, People's Republic of China, or (b) attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will
not
revoke a proxy unless the stockholder actually votes in person at the meeting.
The
proxy
card accompanying this proxy statement is solicited by the Board of Directors
of
the Company. The Company will pay all of the costs of soliciting proxies. In
addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies personally, or by telephone, without receiving
additional compensation. The Company, if requested, will also pay brokers,
banks
and other fiduciaries who hold shares of Common Stock for beneficial owners
for
their reasonable out-of-pocket expenses of forwarding these materials to
stockholders.
BOARD
OF DIRECTORS
The
name,
age and year in which the term expires of each member of the Board of Directors
of the Company is set forth below:
At
the
Annual Meeting, the stockholders will vote on the election of Hanlin Chen,
Qizhou Wu, Robert Tung, Dr. Haimian Cai and William E. Thomson as directors
to
serve for a one-year term until the annual meeting of stockholders in 2009
and
until their successors are elected and qualified. All directors will hold office
until the annual meeting of stockholders at which their terms expire and the
election and qualification of their successors.
NOMINEES
AND CONTINUING DIRECTORS
The
following individuals have been nominated for election to the Board of Directors
or will continue to serve on the Board of Directors after the Annual Meeting:
Hanlin
Chen has served as Chairman of the board and CEO since March 2003. Mr. Chen
is a
standing board member of Political Consulting Committee of Jingzhou City and
vice president of Foreign Investors Association of Hubei Province. He was the
general manager of Shashi
Jiulong Power Steering Gears Co., Ltd. from
1993
to 1997. Since 1997, he has been the Chairman of the Board of Henglong
Automotive Parts, Ltd. Mr. Chen graduated from Barrington University with an
MBA
degree.
Mr.
Hanlin Chen
is the
brother-in-law of the Company’s Senior Vice President, Mr. Andy Yiu Wong
Tse.
C-2
Qizhou
Wu
has served as a Director and the Chief Operating Officer since March 2003.
He was the Managing Vice General Manager of Shashi Jiulong Power Steering Gears
Co., Ltd. from 1993 to 1999 and GM of Henglong Automotive
Parts, Ltd. from
1999
to 2002. Mr. Wu graduated from Tsinghua University in Beijing with a
Masters degree in Automobile Engineering.
Robert
Tung has been a Director of the Company since September 2003 and a member of
the
Company’s Audit Committee, Compensation Committee and Nominating/Corporate
Governance Committee. Since 2001, Mr. Tung has been engaging in different
ventures in China which include commodities trading, real estate development,
assisting Chinese companies go public in North America, brokering Chinese
companies to invest into overseas resources exploitation, etc. Mr. Tung is
currently the President of Multi-Media Communications, Inc., and Executive
Vice
President of Super Microbial Sciences International, LLC. Mr. Tung holds a
M.S. in Chemical Engineering from the University of Virginia and B.S. degrees
in
Computer Science and Chemical Engineering from the University of Maryland and
National Taiwan University, respectively.
Dr.
Haimian Cai has been a Director since September 2003 and a member of the
Company’s Audit Committee, Compensation Committee and Nominating/Corporate
Governance Committee. Dr. Cai is a technical specialist in the automotive
industry from 2001 to 2003. Prior to that, Dr. Cai was a staff engineer in
ITT Automotive Inc. Dr. Cai has written more than fifteen technical papers
and co-authored a technical book regarding the power of metallurgy industry
for
automotive application. Dr. Cai has more than ten patents including
pending patents. Dr. Cai holds a B.S. Degree in Automotive Engineering
from Tsinghua University and a M.S. and Ph. D. in manufacturing engineering
from
Worcester Polytechnic Institute.
William
E. Thomson, CA, has been a Director of the Company since September 2003 and
is a
member of the Company’s Audit, Compensation and Nominating Committees. Mr.
Thomson has been the president of Thomson Associates, Inc., a leading merchant
banking and crisis management company, since 1978. Mr. Thomson’s currently
sits on the Board of the following public-listed companies: TSX - Open EC
Technologies (Software), Score Media Inc. (formerly Headline Media Group Inc.)
(Media) and Industrial Minerals Inc. (NASDAQ).
Other
than as noted above, there are no family relationships among any of the
Company’s directors or executive officers.
DIRECTOR
NOMINATION
Criteria
for Board Membership. In recommendingcandidates
for appointment or re-election to the Board, the nominating/corporate governance
committee, the “nominating/corporate governance committee”, considers the
appropriate balance of experience, skills and characteristics required of the
Board of Directors. It seeks to ensure that at least three directors are
independent under the rules of the Nasdaq Stock Market, that members of the
Company’s audit committee meet the financial literacy and sophistication
requirements under the rules of the Nasdaq Stock Market, and at least one member
of the Board qualifies as an “audit committee financial expert” under the rules
of the Securities and Exchange Commission. Nominees for director are recommended
on the basis of their depth and breadth of experience, integrity, ability to
make independent analytical inquiries, understanding of the Company’s business
environment, and willingness to devote adequate time to Board
duties.
Stockholder
Nominees. The nominating/corporate governance committee will consider written
proposals from stockholders for nominees for director. Any such nominations
should be submitted to the nominating/corporate governance committee c/o Mr.
Li
Jie, the Secretary of the Company, and should include the following information:
(a) all information relating to such nominee that is required to be
disclosed pursuant to Regulation 14A under the Securities Exchange Act of
1934, including such person’s written consent to being named in the proxy
statement as a nominee and to serving as a director if elected; (b) the
names and addresses of the stockholders making the nomination and the number
of
shares of the Company’s common stock which are owned beneficially and of record
by such stockholders; and (c) appropriate biographical information and a
statement as to the qualification of the nominee, and should be submitted in
the
time frame described in the Bylaws of the Company and under the caption,
“Stockholder Proposals for 2009 Annual Meeting” below.
C-3
Process
for Identifying and Evaluating Nominees. The nominating/corporate governance
committee believes the company is well-served by its current directors. In
the
ordinary course, absent special circumstances or a material change in the
criteria for Board membership, the nominating/corporate governance committee
will renominate incumbent directors who continue to be qualified for Board
service and are willing to continue as directors. If an incumbent director
is
not standing for re-election, or if a vacancy on the Board occurs between annual
stockholder meetings, the nominating/corporate governance committee will seek
out potential candidates for Board appointment who meet the criteria for
selection as a nominee and have the specific qualities or skills being sought.
Director candidates will be selected based on input from members of the Board,
senior management of the company and, if the nominating/corporate governance
committee deems appropriate, a third-party search firm. The nominating/corporate
governance committee will evaluate each candidate's qualifications and check
relevant references; in addition, such candidates will be interviewed by at
least one member of the nominating/corporate governance committee. Candidates
meriting serious consideration will meet with all members of the Board. Based
on
this input, the nominating/corporate governance committee will evaluate which
of
the prospective candidates is qualified to serve as a director and whether
the
committee should recommend to the Board that this candidate be appointed to
fill
a current vacancy on the Board, or presented for the approval of the
stockholders, as appropriate.
The
Company has never received a proposal from a stockholder to nominate a director.
Although the nominating/corporate governance committee has not adopted a formal
policy with respect to stockholder nominees, the committee expects that the
evaluation process for a stockholder nominee would be similar to the process
outlined above.
Board
Nominees for the 2008 Annual Meeting. Each
of
the nominees listed in this proxy statement are current directors standing
for
re-election.
DIRECTOR
COMPENSATION
Effective
July 1, 2006, independent Directors receive a director fee from the Company
for
their services as members of the Board of Directors and any committee of the
Board of Directors in the amount of $8,000 per quarter. They are reimbursed
for certain expenses in connection with attending Board and committee meetings.
The
Company has also granted, and expects to continue to grant, non-employee
directors options to purchase shares of the Company’s common stock. The
stockholders of the Company have approved certain director grants at the Annual
Meeting of Stockholders in 2005, which grants were included in the 2004 stock
option plan.
On
June28, 2005, the Company issued additional options to purchase 7,500 shares of
common stock to each of its three independent directors. Such stock
options were vested immediately upon grant and are exercisable at $6.83 per
share over a period of five years. The exercise price represented the fair
market value based on the grant date of the stock options.
On
July6, 2006, the Company issued additional options to purchase 7,500 shares of
common stock to each of its three independent directors. Such stock
options were vested immediately upon grant and are exercisable at $7.94 per
share over a period of five years. The exercise price represented the fair
market value based on the grant date of the stock options.
On
September 5, 2007, the Company issued additional options to purchase 7,500
shares of common stock to each of its three independent directors. Such
stock options were vested immediately upon grant and are exercisable at $7.01
per share over a period of four years. The exercise price represented the
fair market value based on the grant date of the stock options.
Based
on
the number of the board of directors’ service years, workload and performance,
we decide on their pay. The management believes that the pay for the members
of
the board of directors was appropriate as of December 31, 2007. The compensation
that directors received for serving on the Board of Directors for fiscal year
2007 was as follows:
C-4
Name
Fees earned or
paid in cash ($)
Option awards ($)
Total ($)
Haimian
Cai
34,000
51,225
85,225
William
E. Thomson
35,500
51,225
86,725
Robert
Tung
34,000
51,225
85,225
In
accordance with SFAS No. 123R, the cost of the above mentioned stock options
and
warrants issued to directors was measured on the grant date based on their
fair
value. The fair value is determined using the Black-Scholes option pricing
model.
BOARD
MEETINGS AND COMMITTEES
The
Company’s Board of Directors met four (4) times during fiscal 2007. The audit
committee met four (4) times, the compensation committee met two (2) times
and
the nominating/corporate governance committee met two (2) times during fiscal
2007. Each member of the Board attended 75% or more of the aggregate of (i)
the
total number of Board meetings held during the period of such member’s service
and (ii) the total number of meetings of Committees on which such member served,
during the period of such member’s service.
The
Board
has determined that the following directors are “independent” under current
Nasdaq rules: Robert Tung, Dr. Haimian Cai and William E. Thomson.
The
Board
of Directors has standing audit, compensation and nominating/corporate
governance committees.
The
Company’s Audit Committee Charter, Nominating Committee Charter and Compensation
Committee Charter are available on the Company’s website at www.
caasauto.com/caas
Audit
Committee.
The
audit committee currently consists of William E. Thomson (chairman), Robert
Tung
and Dr. Haimian Cai. The Board has determined that all members of the audit
committee are independent directors under the rules of the Nasdaq Stock Market
and each of them is able to read and understand fundamental financial
statements. The Board has determined that William E. Thomson qualifies as an
“audit committee financial expert” as defined by the rules of the Securities and
Exchange Commission. The purpose of the audit committee is to oversee the
accounting and financial reporting processes of the Company and audits of its
financial statements. The responsibilities of the audit committee include
appointing and providing the compensation of the independent accountants to
conduct the annual audit of our accounts, reviewing the scope and results of
the
independent audits, reviewing and evaluating internal accounting policies,
and
approving all professional services to be provided to the Company by its
independent accountants. The audit committee operates under a written charter
that was included as Appendix C with the Company’s definitive proxy statement
filed with the SEC on June 18, 2005.
Compensation
Committee.
The
compensation committee currently consists of Dr. Haimian Cai (chairman),
William E. Thomson and Robert Tung. The Board has determined that all members
of
the compensation committee are independent directors under the rules of the
Nasdaq Stock Market. The compensation committee administers the Company’s
benefit plans, reviews and administers all compensation arrangements for
executive officers, and establishes and reviews general policies relating to
the
compensation and benefits of our officers and employees.
Nominating/corporate
governance Committee.
The
nominating/corporate governance committee currently consists of Robert Tung
(chairman), William E. Thomson, and Dr. Haimian Cai, each of whom the Board
has
determined is an independent director under the rules of the Nasdaq Stock
Market. The nominating/corporate governance committee’s responsibilities include
recommending to the Board of Directors nominees for possible election to the
Board of Directors and providing oversight with respect to corporate governance.
The nominating/corporate governance committee operates under a written charter
that was included as Appendix B with the Company’s definitive proxy statement
filed with the SEC on June 18, 2005.
C-5
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For
the
twelve months ended December 31, 2007, none of our executive officers had a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity or insider participation in compensation
decisions.
COMMUNICATIONS
WITH DIRECTORS
Stockholders
interested in communicating directly with our Directors may send an e-mail
to
the Company’s independent director William Thomson at Bill.Thomson@chl.com.cn.
Mr. Thomson will review all such correspondence and will regularly forward
to
the Board of Directors copies of all such correspondence that deals with the
functions of the Board or committees thereof or that he otherwise determines
requires their attention. Directors may at any time review all of the
correspondence received that is addressed to members of the Board of Directors
and request copies of such correspondence. Concerns relating to accounting,
internal controls or auditing matters will immediately be brought to the
attention of the Audit Committee and handled in accordance with procedures
established by the Audit Committee with respect to such matters.
The
Company has a policy of encouraging all directors to attend the annual
stockholder meetings. This will be the fourth Annual Meeting since the Company's
current management took over the Company in March, 2003. Last year Five (5)
directors attended the Annual Meeting.
CODE
OF CONDUCT AND ETHICS
The
Company has adopted a code of conduct and ethics that applies to all directors,
officers and employees, including its principal executive officer, principal
financial officer and controller. This code of conduct and ethics was filed
as
Exhibit 99.1 to the Company’s Annual Report on Form 10-KSB/A for the
fiscal year ended December 31, 2003 filed with the Securities and Exchange
Commission.
SECURITY
OWNERSHIP OF DIRECTORS AND
OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The
following table sets forth certain information known to the Company with respect
to the beneficial ownership of the Company's Common Stock as of May 12, 2008
by
(i) each person who is known by the Company to own beneficially more than 5%
of
the Company's Common Stock, (ii) each of the Company's directors and executive
officers, and (iii) all executive officers and directors as a group. The table
also shows the number of shares that would be beneficially owned, and the
percentage ownership, if the stockholders approve the issuance of 1,853,542
shares for the acquisition of Jingzhou Henglong Automotive Parts Co., Ltd.,
as
discussed in Proposal 1. Except as otherwise listed below, the address of each
person is c/o China Automotive Systems, Inc., No. 1 Henglong Road, Yu Qiao
Development Zone, Shashi District, Jing Zhou City, Hubei Province, the People's
Republic of China. Percentage ownership is based upon 25,129,702 shares
outstanding as of May 12, 2008.
C-6
Name,
Title
Number
of Shares
Beneficially
Owned (1)
Percentage
Ownership (1)
Number
of Shares Beneficially Owned if the Stockholders approved Proposal
1
Percentage
Ownership if
the Stockholders approved
Proposal 1
All
current Directors who are not Executive Officers as a
Group
82,500
(3)
0.33
%
82,500
(3)
0.3
%
(1)
The
number of shares beneficially owned by a person includes Common Stock subject
to
options held by that person that were currently exercisable at, or exercisable
within 60 days of the date of this proxy statement. The Common Stock issuable
under those options are treated as if they were outstanding for purposes of
computing the percentage ownership of the person holding these options but
are
not treated as if they were outstanding for the purposes of computing the
percentage ownership of any other person.
(2)
Ms.
Liping Xie is the wife of Mr. Hanlin Chen and husband and wife are each
considered beneficial owners of the shares. Ms. Liping Xie is the sister of
Mr.
Andy Yiu Wong Tse. Including 1,170,000 shares issued by the Company to Wiselink
Holdings Limited (“Wiselink”), a company controlled by Mr. Hanlin Chen, as part
of the shares to be issued under an equity transfer agreement by and among
Wiselink, Great Genesis Holdings Limited, (“Great Genesis”), a wholly-owned
subsidiary of the Company and other parties, pursuant to which Wiselink agreed
to transfer and assign to Great Genesis a 35.5% equity interest in Jingzhou
Henglong Automotive Parts Co. Ltd.
(3)
Including 22,500 shares overlying each non-executive director’s exercisable
options; all current directors who are not executive officers have 82,500 shares
as a Group.
(4)
Including 1,853,542 shares to be issued by the Company to Wiselink if the
stockholders approve Proposal 1.
The
Company’s related party transactions include product sales, material purchases
and purchases of equipment and technology. These transactions were consummated
under similar terms as those with the Company's customers and suppliers. On
some
occasions, the Company’s related party transactions also include purchase/sale
of capital stock of the joint ventures and sale of property, plant and
equipment.
In
addition, the Company engaged in the acquisition
of 35.5% equity interest in Jingzhou Henglong Automotive Parts Co., Ltd. by
Great Genesis Holdings Limited, a wholly-owned subsidiary of the Company, as
more particularly described under “Proposal 1” on page C-14 hereto.
C-8
Related
sales and purchases: During the years ended December 31, 2007 and 2006, the
joint-ventures entered into related party transactions with companies with
common directors as shown below:
Related
receivables, advance payments and account payable: As at December 31, 2007
and
2006, accounts receivables, advance payments and account payable between the
Company and related parties are as shown below:
Other
receivables from related parties are primarily unsecured demand loans, with
no
stated interest rate or due date.
On
December 31, 2007 and 2006, with the exception of the receivable from the
investee of Jiulong Jiulong Material of $519,141 and $534,503, which were fully
recorded in the allowance for doubtful accounts, the Company believes that
all
other receivables are collectible, as the related parties are in good financial
condition and are paying their payables to Company pursuant to the terms of
their respective contracts.
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
executive officers and directors and persons who own more than 10% of a
registered class of the Company’s equity securities to file with the Securities
and Exchange Commission initial statements of beneficial ownership, reports
of
changes in ownership and annual reports concerning their ownership of common
stock and other of the Company’s equity securities, on Forms 3, 4 and 5
respectively. Executive officers, directors and greater than 10% stockholders
are required by Commission regulations to furnish the Company with copies of
all
Section 16(a) reports they file. To the best of the Company’s knowledge, based
solely upon a review of the Form 3, 4 and 5 filed, no officer, director or
10%
beneficial stockholder failed to file on a timely basis any reports required
by
Section 16(a).
EXECUTIVE
COMPENSATION
Name
and principal position
Year
Salary
($)
Total
($)
Hanlin
Chen
2007
116,667
116,667
(Chairman)
2006
100,000
100,000
Qizhou
Wu
2007
86,667
86,667
(CEO)
2006
80,000
80,000
Jie
Li
2007
35,000
35,000
(CFO)
2006
15,000
15,000
Outstanding
Equity Awards at Fiscal year-End:
Not
Applicable.
REPORT
OF THE AUDIT COMMITTEE
Under
the
guidance of a written charter adopted by the Board of Directors, the purpose
of
the Audit Committee is to oversee the accounting and financial reporting
processes of the Company and audits of its financial statements. The
responsibilities of the Audit Committee include appointing and providing for
the
compensation of the independent accountants. Each of the members of the Audit
Committee meets the independence requirements of Nasdaq.
Management
has primary responsibility for the system of internal controls and the financial
reporting process. The independent accountants have the responsibility to
express an opinion on the financial statements based on an audit conducted
in
accordance with generally accepted auditing standards.
In
this
context and in connection with the audited financial statements contained in
the
Company’s Annual Report on Form 10-K for 2007, the Audit Committee:
·
reviewed
and discussed the audited financial statements as of and for
the fiscal
year ended December 31, 2007 with the Company’s management and the
independent accountants;
C-11
·
discussed
with Schwartz Levitsky Feldman LLP, the Company’s independent auditors,
the matters required to be discussed by Statement of Auditing Standards
No. 61, Communication with Audit Committees, as amended by Statement
of Auditing Standards No. 90, Audit Committee Communications;
·
reviewed
the written disclosures and the letter from Schwartz Levitsky Feldman
LLP
required by the Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, discussed with
the
auditors their independence, and concluded that the non-audit services
performed by Schwartz Levitsky Feldman LLP are compatible with
maintaining
their independence;
·
based
on the foregoing reviews and discussions, recommended to the Board
of
Directors that the audited financial statements be included in
the
Company’s 2007 Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 filed with the Securities and Exchange Commission;
and
·
instructed
the independent auditors that the Audit Committee expects to be
advised if
there are any subjects that require special attention.
During
fiscal years ended December 31, 2005, 2006 and 2007, the Audit Committee of
the
Board of Directors adopted policies and procedures for the pre-approval of
all
audit and non-audit services to be provided by the Company’s independent auditor
and for the prohibition of certain services from being provided by the
independent auditor. The Company may not engage the Company’s independent
auditor to render any audit or non-audit service unless the service is approved
in advance by the Audit Committee or the engagement to render the service is
entered into pursuant to the Audit Committee’s pre-approval policies and
procedures. On an annual basis, the Audit Committee may pre-approve services
that are expected to be provided to the Company by the independent auditor
during the fiscal year. At the time such pre-approval is granted, the Audit
Committee specifies the pre-approved services and establishes a monetary limit
with respect to each particular pre-approved service, which limit may not be
exceeded without obtaining further pre-approval under the policy. For any
pre-approval, the Audit Committee considers whether such services are consistent
with the rules of the Securities and Exchange Commission on auditor
independence.
Principal
Accountant Fees and Services
The
Audit
Committee has appointed Schwartz Levitsky Feldman LLP as the Company’s
independent auditors for the fiscal year ending December 31, 2007.
The
following table shows the fees paid or accrued by the Company for the audit
and
other services provided by Schwartz Levitsky Feldman LLP for fiscal 2007 and
2006.
2007
2006
Audit
Fees
$
280,000
$
244,500
Audit-Related
Fees(1)
-
19,715
Tax
Fees(2)
8,000
7,000
All
other Fees
—
—
Total
$
288,000
$
271,215
C-12
(1)
Includes accounting and reporting consultations related to acquisitions
and internal control procedures.
(2)
Includes fees for service related to tax compliance services, preparation
and filing of tax returns and tax consulting services.
C-13
PROPOSAL
1
APPROVAL
FOR THE ISSUANCE OF 1,853,542 SHARES OF THE OUTSTANDING SHARES OF THE COMPANY
AS
THE REMAINING CONSIDERATION TO BE PAID IN CONNECTION WITH THE ACQUISITION OF
35.5% EQUITY INTEREST IN JINGZHOU HENGLONG BY GREAT GENESIS, A WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY
Summary
of the Acquisition
On
March31, 2008, Wiselink Holdings Limited (“Wiselink”), Great Genesis Holdings
Limited, (“Great Genesis”), a wholly-owned subsidiary of the Company and other
parties entered into an equity transfer transaction, (the “Acquisition”),
documented by an Equity Transfer Agreement ( the “Agreement”), pursuant to which
Wiselink agreed to transfer and assign a 35.5% equity interest in Jingzhou
Henglong Automotive Parts Co. Ltd., (“Jingzhou Henglong”) to Great Genesis for a
total consideration of US$32,090,000 (the “Consideration”).
Prior
to
the Acquisition, the Company owned a 44.5% interest in Jingzhou Henglong. With
the completion of the Acquisition, the Company increased its ownership in
Jingzhou Henglong to 80%.
Under
the
terms of the Agreement, the Consideration is to be paid as follows:
US$10,000,000 cash was paid by Great Genesis to Wiselink on April 30, 2008,
and
the balance of the purchase price (US$22,090,000) is to be paid (assuming
stockholder approval of the full stock issuance as noted below) by issuance
of
3,023,542 shares of common stock of the Company, valued at US$7.3060 per share
determined as of January 22, 2008, in its capacity as the 100% parent company
of
Great Genesis.
The
issuance of 1,170,000 shares of the 3,023,542 shares took place on April 22,2008. The balance of the shares will be issued upon stockholder approval of
the
issuance as contemplated by the Agreement and the rules of the NASDAQ Stock
Market. In the event that stockholder approval is not obtained the Company
will
pay the balance of the purchase price by issuance of a promissory note, as
discussed below.
On
April3, 2008, the Acquisition was approved by the local Ministry of Commerce of
the
People’s Republic of China in Jingzhou, Hubei Province, China and the
registration of change of stockholders was filed with the local Administration
of Industries and Commerce.
The
Agreement was entered following approval by the independent directors of the
Company, who had been appointed by its board to consider the Acquisition. The
independent directors approved the Acquisition and the Consideration after
consideration, among other things, of a valuation report of Shanghai Lixin
Appraisal Ltd., “Shanghai Lixin”, and the further financial analysis of the
agreement performed by the Canadian Imperial Bank of Commerce World Markets,
“CIBC”, and the Balloch Group.
Shanghai
Lixin, CIBC and the Balloch Group are independent consultants retained in
connection with the Acquisition. They were selected by the three independent
directors after due consideration and three rounds of interview.
Shanghai
Lixin undertook an independent valuation on Jingzhou Henglong.
CIBC
and
the Balloch Group were retained by the independent directors to conduct a review
of the Acquisition and to prepare a market report in respect of the same. The
following areas were covered in the market report: (i) valuation of Jingzhou
Henglong in the context of the Acquisition; (ii) effect of the Acquisition
on
the Company’s financial results; (iii) issues related to the impact on the
Company’s cash flow after the Acquisition; and (iv) issues related to the
performance of the Company’s shares after the Acquisition.
C-14
The
purchase price of US$32,090,000 for an additional 35.5% equity interest in
Jingzhou Henglong was first negotiated by the management and a company
controlled by the majority stockholder of the Company on November 16, 2007.
Thereafter, the independent directors of the Company set up a general rule
for
determining the purchase price, that is, the final purchase price should be
the
lower of the purchase price as initially negotiated or the fair market price
as
determined by the independent consultant, Shanghai Lixin. On January 21, 2008,
Shanghai Lixin issued a valuation report concluding the value of Jingzhou
Henglong as at the valuation date, December 31, 2007, was RMB 887 million.
In
the circumstances, the fair market value of an additional 35.5% equity interest
of Jingzhou Henglong was RMB 315 million, equivalent to approximately US$43
million. Since the fair market value is higher than the first negotiated
purchase price, US$32,090,000 was determined as the final purchase price of
the
Acquisition.
Prior
to
the Acquisition, there was no material relationship existed between Shanghai
Lixin, CIBC, the Balloch Group and the Company.
We
are
not seeking stockholder approval of the Acquisition, but rather, we are seeking
stockholder approval of the issuance of 1,853,542 shares of the Company’s
outstanding shares as the remaining Consideration to be paid in connection
with
the Acquisition. If Proposal 1 is not approved by the stockholders within one
year from the execution of the Agreement, Great Genesis will issue Wiselink
a
subordinated non-interest bearing promissory note payable in three years in
a
principal amount based on 1,853,542 shares multiplied by the volume weighted
average price per share of the Company’s common share calculated with respect to
the twenty (20) days prior to the one year anniversary of the Agreement, but
in
no event greater than US$13,541,978. Accordingly, the Board represents a vote
in
favor of Proposal 1.
Why
we are seeking stockholder approval
We
are
submitting this Proposal for stockholder approval pursuant to Rule 4350 of
the
Nasdaq Marketplace Rules (“Nasdaq Rule 4350”), which contains the qualitative
listing requirements applicable to Nasdaq Capital Market issuers, such as the
Company. Among other items, Nasdaq Rule 4350 requires stockholder approval
prior
to the issuance of securities in connection
with the acquisition of the stock or assets of another company if any director,
officer or substantial stockholder of the issuer has a 5% or greater interest
(or such persons collectively have a 10% or greater interest), directly or
indirectly, in the company or assets to be acquired or in the consideration
to
be paid in the transaction or series of related transactions and the present
or
potential issuance of common stock, or securities convertible into or
exercisable for common stock, could result in an increase in outstanding common
shares or voting power of 5% or more. The Acquisition requires stockholder
approval under this rule because Mr. Hanlin Chen, a director of the company,
is
the majority owners of Wiselink, and Mr. Qizhou Wu, also a director of the
Company, is a minority stockholder of Wiselink.
Applying
this requirement to the Acquisition, we are seeking stockholder approval of
the
issuance of 1,853,542
shares of the Company’s outstanding shares as the remaining Consideration to be
paid in connection with the Acquisition.
The
Board
of Directors has considered that the Acquisition was in the Company’s best
interest and in the best interest of the stockholders because after the
Acquisition, the Company increased its ownership in Jingzhou Henglong to 80%.
If
the Company cannot issue the remaining 1,853,542 shares as the remaining
Consideration to be paid within one year from the execution of the Agreement,
under the Agreement, Great Genesis will issue Wiselink a subordinated
non-interest bearing promissory note payable in three years in a principal
amount based on 1,853,542 shares multiplied by the volume weighted average
price
per share of the Company’s common share calculated with respect to the twenty
(20) days prior to the one year anniversary of the Agreement, but in no event
greater than US$13,541,978.
Description
of Jingzhou Henglong
Jingzhou
Henglong was incorporated in 1997 in Jingzhou, Hubei, China as a privately
held
corporation. Jingzhou Henglong is engaged in the production of integral power
steering gear and rack and pinion power steering gear for light and heavy-duty
vehicles and cars. Jingzhou Henglong
owns a Hubei Provincial-Level Technical Center, which is approved by the Hubei
Economic Commission. The center has a staff of 134, including 13 senior
engineers, 2 foreign experts and 100 engineers, primarily focused on steering
system R&D, tests, production process improvement and new material and
production methodology application.
C-15
Material
Features of the Acquisition
General
Under
the
terms of the Agreement, the Consideration is paid as follows: US$10,000,000
cash
was paid by Great Genesis to Wiselink on April 30, 2008, and the balance of
the
purchase price (US$22,090,000) was paid by issuance of 3,023,542 shares of
common stock of the Company, valued at US$7.3060 per share determined as of
January 22, 2008, in its capacity as the 100% parent company of Great Genesis.
Of these shares, 1,170,000 shares, equivalent to about 4.9% of the Company’s
outstanding shares, were issued to Wiselink on April 22, 2008, and the remaining
1,853,542 shares of the Company will be issued after obtaining stockholder’s
approval as required by the Nasdaq rules.
Representations
and Warranties
In
the
Agreement, Wiselink and its affiliated company, which are parties to the
Agreement, make representations and warranties to Great Genesis that the equity
interest transferred under the Agreement is (i) legally and validly owned by
Wiselink, (ii) free from and clear of any pledge or other encumbrance, and
(iii)
no third party enjoys any rights and claims thereto.
In
the
Agreement, Great Genesis covenants with Wiselink that it would pay the
Consideration as stipulated in the Agreement.
Reasons
for engaging in the Acquisition
The
Board
of Directors considered that the Acquisition was in the Company’s best interest
and in the best interest of the stockholders because after the Acquisition,
the
Company increased its ownership in Jingzhou Henglong to 80%. The Acquisition
is
a milestone in helping the Company achieve its near-term strategic goals of
improving earnings, net margin and stockholders’ value. Further, the value of
Jingzhou Henglong's 35.5% earnings acquired would have resulted in increasing
the Company’s 2007 diluted earnings per share from US$0.37 to
US$0.50.
Material
Differences in the rights of stockholders
The
Acquisition did not change the rights of the existing stockholders of the
Company; however, the Acquisition did dilute stockholders’ equity interest
because of the increase in the number of shares of common stock outstanding.
As
of May 12, 2008, 25,129,702 shares of common stock were issued and outstanding,
and 5,495,209* shares of common stock were subject to issuance upon the exercise
of outstanding warrants and vested and unvested stock options and conversion
of
outstanding convertible notes. 1,170,000 new shares, equivalent to about 4.9%
of
the Company’s outstanding shares, were issued to Wiselink on April 22, 2008. If
Proposal 1 is not approved by the stockholders, Great Genesis will issue
Wiselink a subordinated non-interest bearing promissory note payable in three
years in a principal amount based on 1,853,542 shares multiplied by the volume
weighted average price per share of the Company’s common share calculated with
respect to the twenty (20) days prior to the one year anniversary of the
Agreement, but in no event greater than US$13,541,978.
*=
5,271,459 (Lehman Brothers Commercial Corporation Asia Limited and YA Global
Investments, L.P.’s convertible bonds and warrants) + 156,250 (Cornell Capital
Partners, L.P.’s warrants) + 67,500 (independent directors’ options)
Reason
for the recommendation of the Board of Directors
The
Board
of Directors recommends a vote in favor of Proposal 1 in order to give the
Company the flexibility to pay the balance of the Consideration for the
Acquisition in the manner which is in the best interests of the Company.
Historically, the Company’s share price has been extremely volatile. Development
of commercial products requires significant cash resources. If the stockholders
approve Proposal 1, the Board of Directors will therefore be able to pay the
balance of the Consideration for the Acquisition in the form of common
stock.
C-16
If
Proposal 1 is not approved by the stockholders, the Company would be required
to
pay the balance of the Consideration in the form of a subordinated non-interest
bearing promissory note. In that event, the stockholders would therefore not
be
subject to additional dilution as a result of the stock issuance. However,
the
Board of Directors does not believe that payment of the remaining Consideration
in the form of a non-interest bearing promissory note would be in the best
interests of the Company and its stockholders. Accordingly, the Board represents
a vote in favor of Proposal 1.
Financial
information
The
Company has, for every period in which Jingzhou Henglong financial statements
would otherwise be required to be presented, consolidated such statements in
the
Company’s own financial statements. Consequently, reference is made to the
audited consolidated financial statements of the Company or the years ended
December 31, 2006 and December 31, 2007, filed with the Company’s annual report
on Form 10-K filed March 25, 2008 and to the Company’s unaudited consolidated
financial statements for the three month period ended March 31, 2008 filed
with
the Company’s Quarterly Report on Form 10-Q filed May 14, 2008.
The
financial statements of the Company are incorporated by reference from the
Company’s annual report on Form 10-K, which is being mailed to all stockholders
in connection with the annual meeting. The pro forma financial information
required by Item 9.01 of Form 8-K are incorporated by reference from Current
Report on Form 8-K/A filed with the Securities and Exchange Commission, the
“SEC”, by the Company on May 8, 2008. The Form 8-K/A is attached to this proxy
statement as Exhibit A and is incorporated by reference herein.
Description
of common stock
CURRENT
CAPITAL STRUCTURE
As
of May12, 2008, the Company had 80,000,000 Shares of Common Stock with a par value
of
$0.0001, authorized, with 25,129,702 shares outstanding and 20,000,000 Shares
of
Preferred Stock with a par value of $0.0001, authorized, with zero Shares
outstanding.
COMMON
STOCK
The
holders of Common Stock are entitled to one vote for each share held of record
on all matters to be voted on by the stockholders. There is no cumulative voting
with respect to the election of directors, with the result that the holders
of
more than 50 percent of the Shares voted for the election of directors can
elect
all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the board of directors out of funds
legally available therefor. In the event of liquidation, dissolution, or winding
up of the Company, the holders of Common Stock are entitled to share ratably
in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the commons stock. All of the outstanding Shares of
Common Stock are fully paid and non-assessable.
PREFERRED
STOCK
The
Company has 20,000,000 Shares of Preferred Stock, par value $0.0001, authorized
with zero Shares outstanding.
C-17
OPTIONS
AND WARRANTS
As
of May12, 2008, the Company had 67,500 options and 1,474,114 warrants outstanding.
The
options are exercisable, details of which are more particularized
below:-
On
February 1, 2008, the Company entered into a Securities Purchase Agreement
with
two institutional investors (the “Securities
Purchase Agreement”).
At the
February 15, 2008 closing pursuant to the Securities Purchase Agreement, the
Company issued and sold to the two institutional investors senior convertible
notes (the "Senior Convertible Notes") with an aggregate original principal
amount of $35,000,000 plus warrants to purchase an aggregate of 1,317,684 shares
of the Company's common stock. In consideration for the issuance of the Senior
Convertible Notes and warrants, the Company received $35,000,000 in cash from
the institutional investors -- $17,500,000 directly at the closing, and
$17,500,000 which was delivered to the Company from an escrow account on April11, 2008 following the consummation of the Acquisition.
The
Senior Convertible Notes are unsecured and are convertible into common stock
at
a conversion price of $8.8527 per share, subject to possible downward
adjustments, including a semiannual reset (but the reset not to be to below
$7.0822 per share) based on the Company's stock price. Subject to earlier
redemption in circumstances that include default, change of control, or extreme
stock price levels, the Senior Convertible Notes will mature five years after
the closing; the investors also have a direct redemption right on the second
and
third anniversaries of the closing. The Senior Convertible Notes are convertible
at the holders' option; also, semiannually, the Company can force conversion
of
a portion of the Senior Convertible Notes if the Company’s stock price attains
certain levels. The Senior Convertible Notes will bear interest at an annual
rate increasing over time from 3% to 5%; if the Senior Convertible Notes are
repaid or redeemed rather than being converted, the Company must make an
additional make-whole payment which, together with interest already paid, will
equate to gross interest of up to 13% .
The
Company made several covenants in favor of the holders of the Senior Convertible
Notes, including covenants which restrict the Company’s ability to repurchase
Common Stock or to pay cash dividends on Common Stock.
The
Company also carries customary commercial indebtedness, which also has such
covenants.
Dissenters’
rights
Under
Delaware law, stockholders are not entitled to dissenters’ rights with respect
to the Acquisition contemplated by this Proposal 1.
Vote
required
Under
Nasdaq Rule 4350, the minimum vote which will constitute stockholder approval
shall be a majority of the total votes cast on this Proposal 1. These votes
may
be cast in person, by proxy at a meeting of stockholders or by written consent
in lieu of a special meeting to the extent permitted by applicable state and
federal law and rules (including interpretations thereof), including, without
limitation, SEC Regulations 14A and 14C. The
1,170,000 shares of the 3,023,542 shares issued to Wiselink, a company
controlled by Mr. Hanlin Chen, on April 22, 2008 as part of the Acquisition
will
not be voted on this Proposal 1.
C-18
The
Board of Directors recommends a vote “for” the issuance of 1,853,542 shares of
the Company’s outstanding shares as the remaining Consideration to be paid in
connection with the acquisition of 35.5% equity interest in Jingzhou Henglong
by
Great Genesis, a wholly-owned subsidiary of the Company, for a total
consideration of US$32,090,000.
PROPOSAL
2 — ELECTION OF DIRECTORS
At
the
Annual Meeting, the stockholders will vote on the election of five directors
to
serve for a one-year term until the 2009 annual meeting of stockholders and
until their successors are elected and qualified. The Board of Directors has
unanimously approved the nomination of Hanlin Chen, Qizhou Wu, Robert Tung,
Dr.
Haimian Cai and William E. Thomson for election to the Board of Directors.
The
nominees have indicated that they are willing and able to serve as directors.
If
any of these individuals becomes unable or unwilling to serve, the accompanying
proxy may be voted for the election of such other person as shall be designated
by the Board of Directors. The Directors will be elected by a plurality of
the
votes cast, in person or by proxy, at the Annual Meeting, assuming a quorum
is
present. Stockholders do not have cumulative voting rights in the election
of
directors.
The
Board of Directors recommends a vote “for” the election of Hanlin Chen, Qizhou
Wu, Robert Tung, Dr. Haimian Cai and William E. Thomson as directors.
Unless
otherwise instructed, it is the intention of the persons named in the
accompanying proxy card to vote shares represented by properly executed proxy
cards for the election of Hanlin Chen, Qizhou Wu, Robert Tung, Dr. Haimian
Cai
and William E. Thomson.
PROPOSAL
3 — RATIFICATION OF INDEPENDENT AUDITORS
At
the
Annual Meeting, the stockholders will be asked to ratify the appointment of
Schwartz Levitsky Feldman LLP as the Company’s independent auditors for the
fiscal year ending December 31, 2008. Representatives of Schwartz Levitsky
Feldman LLP are expected to be present at the Annual Meeting and will have
the
opportunity to make statements if they desire to do so. Such representatives
are
also expected to be available to respond to appropriate questions.
The
Board of Directors recommends a vote “for” the ratification of the appointment
of Schwartz Levitsky Feldman LLP as the Company’s independent auditors for the
fiscal year ending December 31, 2008.
INCORPORATION
BY REFERENCE
The
SEC
allows the Company to “incorporate by reference” information into this proxy
statement, which means that the Company can disclose important information
to
you by referring you to other documents that we have filed separately with
the
SEC and delivered to you with the copy of this proxy statement. The information
incorporated by reference is deemed to be part of this proxy statement. This
proxy statement incorporates by reference the following documents:-
(i)
the
financial statements of the Company as contained in the Company’s annual report
on Form 10-K filed by the Company on March 25, 2008, which is being mailed
to
all stockholders in connection with the annual meeting; and
(ii)
Current Report on Form 8-K/A filed with the SEC by the Company on May 8, 2008,
which contains financial statements and auditors’ consent in connection with the
Acquisition. The Form 8-K/A is attached to this proxy statement as Exhibit
A and
is incorporated by reference herein.
C-19
OTHER
MATTERS
As
of the
time of preparation of this proxy statement, neither the Board of Directors
nor
management intends to bring before the meeting any business other than the
matters referred to in the Notice of Annual Meeting and this proxy statement.
If
any other business should properly come before the meeting, or any adjournment
thereof, the persons named in the proxy will vote on such matters according
to
their best judgment.
STOCKHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Under
the
rules of the Securities and Exchange Commission, stockholders who wish to submit
proposals for inclusion in the proxy statement of the Board of Directors for
the
2009 Annual Meeting of Stockholders must submit such proposals so as to be
received by the Company at No. 1 Henglong Road, Yu Qiao Development Zone, Shashi
District, Jing Zhou City, Hubei Province, People's Republic of China, on or
before January 26, 2009. In addition, if the Company is not notified by the
secretary of the Company of a proposal to be brought before the 2009 Annual
Meeting by a stockholder on or before April 10, 2009, then proxies held by
management may provide the discretion to vote against such proposal even though
it is not discussed in the proxy statement for such meeting.
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND MAIL
PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL ENSURE THE
PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE
IN
PERSON IF YOU WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY
CARD.
EXHIBITS
Exhibit
A Current
Report on Form 8-K/A filed with the SEC on May 8, 2008.
The
undersigned hereby appoints Hanlin Chen and Qizhou Wu or any one of them with
full power of substitution, proxies to vote at the Annual Meeting of
Stockholders of China Automotive Systems, Inc. (the “Company”) to be held on
June 26, 2008 (Thursday) at 10 am, local time, and at any adjournment thereof,
hereby revoking any proxies heretofore given, to vote all shares of Common
Stock
of the Company held or owned by the undersigned as directed on the reverse
side
of this proxy card, and in their discretion upon such other matters as may
come
before the meeting.
1. To
approve the issuance of 1,853,542 shares of the outstanding shares of the
Company as the remaining consideration to be paid in connection with the
acquisition of 35.5% equity interest in Jingzhou Henglong Automotive Parts
Co.,
Ltd. by Great Genesis Holdings Limited, a wholly-owned subsidiary of the
Company.
o For
o Against
o Abstain
2. To
elect
Hanlin Chen, Qizhou Wu, Robert Tung, Dr. Haimian Cai and William E. Thomson
as
directors, to hold office until the 2009 Annual Meeting of Stockholders and
until their successors are elected and qualified, the nominees listed
below:
o
FOR
All
nominees listed
(except as indicated
below)
o
WITHHOLD AUTHORITY
to vote (as to all nominees)
To
withhold authority to vote for any individual nominee, write the nominee’s name
on the line provided below.
3. To
ratify
the appointment of Schwartz Levitsky Feldman LLP as the Company’s independent
auditors for the fiscal year ending December 31, 2008.
o For
o Against
o Abstain
D-21
The
Board
recommends that you vote FOR the above proposals. This proxy, when properly
executed, will be voted in the manner directed above. WHEN NO CHOICE IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE ABOVE PROPOSALS. This proxy may
be
revoked by the undersigned at any time, prior to the time it is voted by any
of
the means described in the accompanying proxy statement.
Signature(s)
of Stockholder(s)
Date
and sign exactly as name(s) appear(s) on this proxy. If signing for
estates, trusts, corporations or other entities, title or capacity
should
be stated. If shares are held jointly, each holder should
sign.
Date:___________,
2008
PLEASE
COMPLETE, DATE AND SIGN THIS PROXY
AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
D-22
Dates Referenced Herein and Documents Incorporated by Reference