UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): February 1, 2008
CHINA
AUTOMOTIVE SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
000-33123
(Commission
File Number)
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Delaware
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33-0885775
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(State
or other jurisdiction
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(I.R.S.
Employer
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of
incorporation)
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Identification
No.)
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No.
1
Henglong Road, Yu Qiao Development Zone
Shashi
District, Jing Zhou City
Hubei
Province
People’s
Republic of China
(Address
of principal executive offices, with zip code)
(86)
27-5981 8527
(Registrant's
telephone number, including area code)
NONE
(Former
name or former address, if changed since last report)
Item
1.01 Entry into a Material Definitive Agreement.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Item
3.02 Unregistered Sales of Equity Securities.
On
February 1, 2008, we entered into a Securities Purchase Agreement calling for
the issuance to two institutional investors, for $35,000,000, of Senior
Convertible Notes with an original principal amount of $35,000,000 and common
stock Warrants to purchase 1,317,865 shares of common stock. The closing of
the
transaction is, subject to customary closing conditions, expected to occur
on
February 13, 2008. At the closing, we will receive $17,500,000 cash and the
investors will deposit another $17,500,000 cash in escrow to be delivered to
us
upon the satisfaction or waiver of certain conditions.
The
Senior Convertible Notes will be unsecured and will be 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 our stock price. Subject to earlier redemption
in
circumstances that include default, failure to close the previously announced
acquisition of a certain minority interest in our Jingzhou Henglong Automotive
Parts Co. subsidiary, 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, we can force conversion of a portion of the Senior
Convertible Notes if our 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 we must make an additional make-whole payment which, together
with interest already paid, will equate to gross interest of up to
13%.
The
exercise price of the Warrants is $8.8527 per share, subject to possible
downward adjustments based on a weighted-average antidilution formula. The
Warrants will expire one year after the closing.
We
will,
pursuant to a Registration Rights Agreement to be entered into at the closing,
undertake to register for resale the shares of common stock underlying the
Senior Convertible Notes and Warrants.
The
issuance of Senior Convertible Notes and Warrants will be pursuant to the
Securities Act Section 4(2) registration exemption.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
February 4,
2008
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China
Automotive Systems, Inc.
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By:
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/s/
Hanlin
Chen
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