Item 8.01 Other Events
On November 23, 2020, the Court of Chancery of the State of Delaware granted a
scheduling order (the "Scheduling Order"), which, among other things, scheduled
the settlement hearing (the "Settlement Hearing") for the action described below
for February 5, 2021, at 11:00 a.m. EST at the Court of Chancery of the State of
Delaware, Leonard L. Williams Justice Center, 500 N. King St., Wilmington, DE
19801.
The Scheduling Order provided detailed information concerning the notice of
settlement and the Settlement Hearing. Pursuant to the Scheduling Order, any
objections to the settlement must be filed in writing with the Register in
Chancery and served copies of such objection on Plaintiffs' counsel and
Defendants' counsel such that they are received no later than ten (10) calendar
days prior to the Settlement Hearing. Attached hereto as Exhibit 99.1 and
incorporated herein by reference is the Notice of Pendency and Proposed
Settlement of Stockholder Derivative Action, Settlement Hearing, and Right to
Appear, which explains how Company stockholders and settlement class members
will be affected by the settlement.
The Scheduling Order relates to a stipulation and agreement of settlement and
release (the "Settlement Agreement") entered into on November 5, 2020 by and
among (i) plaintiffs Heng Ren Silk Road Investments LLC, Heng Ren Investments
Limited Partnership and CIP (Change in Progress), L.P. (collectively,
"Plaintiffs"), (ii) nominal defendant China Automotive Systems, Inc. (the
"Company"), and (iii) individually named defendants Hanlin Chen, Qizhou Wu,
Arthur Wong, Guangxun Xu, and Robert Tung (collectively, "Defendants"),
resolving a verified stockholder derivative complaint in the action under the
caption Heng Ren Silk Road Investments, LLC, et al., v. Hanlin Chen, et al.,
C.A. No. 2019-0010-JTL (the "Action") in the Court of Chancery of the State of
Delaware (the "Court") derivatively on behalf of the Company against Defendants
alleging, among other things, that Defendants had breached their fiduciary
duties to the Company by awarding themselves excessive compensation and by
making inadequate, false and misleading disclosures to stockholders regarding
director compensation.
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Under the terms of the Settlement Agreement, the parties have agreed that: (i) a
payment of $55,998 will be made to the Company; (ii) twice a year, each year,
the Company will make its chief executive officer and/or chief financial officer
available in person or by videoconference or telephonic conferences as
determined by the Company at its discretion to meet with stockholders and
prospective investors and answer questions while the Company will continue its
regular telephonic conferences with stockholders following its quarterly filings
with the Securities and Exchange Commission; (iii) the Company will arrange for
its Henglong USA office in Detroit to host stockholders for each annual meeting
of stockholders where the main items are the election of new directors and
ratification of the appointment of auditors, with members of the board and, if
practicable, the full board, and the management joining remotely; and (iv) the
Company or its insurance carrier will reimburse Plaintiffs' reasonable legal
fees and expenses, and will not oppose Plaintiffs' counsel's request for a
reasonable award of attorneys' fees in the amount of $100,000, as applied to and
to be approved by the Court. In the event the parties are unable to agree to a
reasonable amount of attorneys' fees, and Plaintiffs' counsel's petition for an
award of attorneys' fees is contested, the other terms of the Settlement
Agreement shall continue in full force and effect.
The parties agreed that the Settlement and the above stipulation shall in no
event be construed as, or deemed to be, evidence of a concession or admission by
Defendants as to any of the claims asserted in the action. The claims asserted
in the Action are disputed and Defendants, collectively and individually, deny
any liability whatsoever to the Plaintiffs for the claims asserted in the
action.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No Description
99.1 NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF STOCKHOLDER DERIVATIVE
ACTION, ETTLEMENT HEARING, AND RIGHT TO APPEAR
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