INVESTOR RIGHTS AGREEMENT
THIS
INVESTOR RIGHTS AGREEMENT (this
“Agreement”)
is
made and entered into as of January 25, 2007,
by and
among (i) (a) Fushi International, Inc., a Nevada corporation (the “Company”),
Fushi
Holdings, Inc., a Delaware corporation (“FHI”),
Dalian Fushi Bimetallic Manufacturing Company Limited, a limited liability
company organized and existing under the laws of the PRC (“Dalian
Fushi”),
Fushi
International (Dalian) Bimetallic Cable Co., Ltd., a wholly foreign-owned
limited liability company organized and existing under the laws of the PRC
(the
“WFOE”,
and,
together with the Company, FHI and Dalian Fushi, the “Group
Companies”);
(b)
Mr. Xx Xx (the “Controlling
Shareholder”),
a
resident of Dalian, Liaoning Province in the People’s Republic of China (the
“PRC”);
and
(c) Mr. Xx Xx, Xx. Xxxxxx Xxxx Xxx, a resident of Dalian, Liaoning Province
in
the PRC, and Mr. Xxxxx Xxxx Wenbing, a resident of Dalian, Liaoning Province
in
the PRC (together with Mr. Xx Xx and Xx. Xxxxxx Xxxx Xxx, the “Senior
Management”)
and
(ii) Citadel Equity Fund Ltd. (“Citadel”).
Capitalized terms used herein but not otherwise defined herein shall have the
respective meanings set forth in the Notes Purchase Agreement (as defined
below).
WITNESSETH:
WHEREAS,
the Group Companies and Citadel have entered into that certain Notes
Purchase
Agreement dated as of January 24,
2007
(the “Notes
Purchase
Agreement”),
pursuant to which the Company has agreed to issue to Citadel, and Citadel has
agreed to purchase from the Company, US$40,000,000 Guaranteed Senior Secured
Floating Rate Notes due 2012
(the
“HY
Notes”)
and
US$20,000,000 3.0% Guaranteed Senior Secured Convertible Notes due
2012
(the
“Convertible
Notes”,
and
together
with the HY Notes, the “Notes”),
which
are convertible into the Company’s common stock, par value $.006
(the
“Common
Stock”,
and,
together with the Notes, the “Securities”);
WHEREAS,
in consideration of Citadel entering into the
Notes
Purchase
Agreement, the Company has agreed to provide certain rights set forth in this
Agreement.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto, intending to be legally bound by this agreement, agree as
follows:
1. Representations
and Warranties of the Group Companies, the Controlling Shareholder and the
Senior Management.
Each of
the Group Companies, the Controlling Shareholder and the Senior Management,
jointly and severally, represents and warrants that:
1.1 (i)
The
Controlling Shareholder is the beneficial owner, free and clear of all Liens,
of
11,915,998 shares
of
Common
Stock
(of
record or through a brokerage firm or other nominee arrangement), which
constitutes 52.30%
of the
outstanding voting power of the Company’s capital stock,
(ii)
Xx. Xxxxxx Xxxx Xxx is the beneficial owner, free and clear of all Liens, of
1,272,244
shares
of Common
Stock (of record or through a brokerage firm or other nominee arrangement),
which constitutes 5.58%
of the
outstanding voting power of the Company’s capital stock, and (iii) Mr. Xxxxx
Xxxx Wenbing is the beneficial owner, free and clear of all Liens, of
200,000
shares
of Common
Stock (of record or through a brokerage firm or other nominee arrangement),
which constitutes 0.88%
of the
outstanding voting power of the Company’s capital stock. The Controlling
Shareholder is the beneficial owner, free and clear of all Liens, of an
aggregate of 87.73% of the equity interests of Dalian Fushi.
1.2 Each
of
the Group Companies, the Controlling Shareholder and each member of the Senior
Management (each of the foregoing, a “Warrantor”)
has
full power and authority to make, enter into and carry out the terms of this
Agreement. This Agreement has been duly executed and delivered by each Warrantor
and constitutes the legal, valid and binding obligations of such Warrantor
enforceable against such Warrantor in accordance with its terms.
1.3 The
execution and delivery of this Agreement by each Warrantor do not, and the
performance of this Agreement by such Warrantor will not: (i) conflict with
or
violate any law, rule regulation, order, decree or judgment applicable to any
Warrantor or by which any Warrantor or any of the properties of any Warrantor
is
or may be bound or affected, or the Charter Documents of any Group Company;
(ii)
result in or constitute (with or without notice or lapse of time) any breach
of
or default under any contract to which any Warrantor is a party or by which
any
Warrantor or any of the affiliates or properties of any Warrantor is or may
be
bound or affected, or (iii) result in the creation of any encumbrance or
restriction on any of the shares of Common Stock or equity interests in any
other Group Company or properties of any Warrantor. The execution and delivery
of this Agreement by each Warrantor do not, and the performance of this
Agreement by each Warrantor will not, require any consent or approval of any
Person.
1.4 Each
of
the Group Companies (i) has been duly organized, is validly existing and is
in
good standing under the laws of its jurisdiction of organization, (ii) has
all
requisite power and authority to carry on its business and to own, lease and
operate its properties and assets, and (iii) is duly qualified or licensed
to do
business and is in good standing as a foreign corporation or limited liability
company, as the case may be, authorized to do business in each jurisdiction
in
which the nature of such business or the ownership or leasing of such properties
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a material adverse effect on (A)
the
properties, business, prospects, operations, earnings, assets, liabilities
or
condition (financial or otherwise) of the Group Companies, taken as a whole,
(B)
the ability of the Group Companies to perform their respective obligations
under
any Document or (C) the validity of any of the Documents or the consummation
of
any of the transactions contemplated therein (each, a “Material
Adverse Effect”).
1.5 Except
as
set forth on Schedule
1.5
of the
Disclosure Schedule, there are no outstanding (A) options, warrants or other
rights to purchase from any Group Company, (B) agreements, contracts,
arrangements or other obligations of any Group Company to issue, or (C) other
rights to convert any obligation into or exchange any securities for, in the
case of each of clauses (A) through (C), shares of capital stock of, or other
ownership or equity interests in, any Group Company. Except as otherwise
contemplated by that certain voting agreement set forth in this Agreement,
the
Company is not a party or subject to any agreement or understanding, and, to
the
Company’s knowledge after due inquiry, there is no agreement or understanding
with any Person that affects or relates to (i) the voting or giving of written
consents with respect to any security of the Company (including, without
limitation, any voting agreements, voting trust agreements, shareholder
agreements or similar agreements) or the voting by a director of the Company
or
(ii) the sale, transfer or other disposition with respect to any security of
the
Company.
1.6 Each
of
the HY Notes and the Convertible Notes, when issued, sold and delivered in
accordance with the terms thereof and for the consideration set forth herein,
will be free of restrictions on transfer, other than restrictions on transfer
under applicable state and federal securities laws. Assuming the accuracy of
the
Purchaser’s representations in Section 6 of the Notes Purchase Agreement, the
Notes will be issued in compliance with applicable state and federal securities
laws. The HY Notes, when issued, will be in the form contemplated by the HY
Note
Indenture, and the Convertible Notes, when issued, will be in the form
contemplated by the Convertible Note Indenture. Each of the HY Notes and the
Convertible Notes has been duly authorized by the Company and, when executed
and
delivered by the Company, authenticated by the Trustee and delivered to the
Purchaser in accordance with the terms of the Notes Purchase Agreement and
its
respective Indenture, such Notes will have been duly executed, issued and
delivered by the Company and will constitute legal, valid and binding
obligations of the Company, entitled to the benefits of its respective
Indenture, and enforceable against the Company in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally. The Guarantees have been duly authorized, and, when
the Notes have been duly executed, authenticated and issued in accordance with
the provisions of its respective Indenture and delivered to and paid for by
the
Purchaser with the Guarantee endorsed thereon by the Guarantor, will constitute
the legal, valid and binding obligations of the Guarantor entitled to the
benefits of such Indenture.
1.7 The
Conversion Shares have been duly and validly authorized for issuance by the
Company, and when issued pursuant to the terms of the Convertible Note
Indenture, will be validly issued, fully paid and non-assessable, not subject
to
any preemptive or similar rights, free from all taxes, Liens, charges and
security interests with respect to the issuance thereof and free of restrictions
on transfer other than as expressly contemplated by the Documents.
1.8 Except
as
disclosed in the SEC Reports, there is no action, claim, suit, demand, hearing,
notice of violation or deficiency, or proceeding, domestic or foreign
(collectively, “Proceedings”),
pending or, to the knowledge of the Company, threatened, that seeks to restrain,
enjoin, prevent the consummation of, or otherwise challenges any of the
Documents, any Restructuring Agreement (considered alone or with other
Restructuring Agreements) or any of the transactions contemplated therein.
Except as disclosed in the SEC Reports, none of the Group Companies is subject
to any judgment, order or decree of which the Company has
knowledge.
1.9 Each
of
the Group Companies has good and marketable title to all real property and
personal property owned by it, in each case free and clear of any Liens as
of
the Closing Date, except such Liens as permitted under the Documents. For the
real property not owned by any of the Group Companies and currently used or
planned to be used for the business operations of the Group Companies, each
of
such Group Companies has good and marketable title to all leasehold estates
in
real and personal property being leased by it and, in each case free and clear
of all Liens as of the Closing Date.
1.10 All
Indebtedness represented by the Notes and the Guarantees is being incurred
for
proper purposes and in good faith. Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the fair saleable
value of the Group Companies’ assets exceeds the amount that will be required to
be paid on or in respect of the Group Companies’ existing debts and other
liabilities (including contingent liabilities) as they mature; (ii) the present
fair saleable value of the assets of the Group Companies is greater than the
amount that will be required to pay the probable liabilities of the Group
Companies on their respective debt as they become absolute and mature, and
(iii)
the Group Companies are able to realize upon their assets and pay their debt
and
other liabilities (including contingent obligations) as they mature; (iv) the
Group Companies’ assets do not constitute unreasonably small capital to carry on
their respective businesses as now conducted and as proposed to be conducted
including their respective capital needs taking into account the particular
capital requirements of the business conducted by the Group Companies, and
projected capital requirements and capital availability thereof; and (v) the
current cash flow of each of the Group Companies, together with the proceeds
the
Company would receive, were it to liquidate all of its assets, after taking
into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its liabilities when such amounts are required to be paid.
None of the Group Companies intends to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of cash
to
be payable on or in respect of its debt). The Company has no knowledge of any
facts or circumstances which lead it to believe that it or any other Group
Company will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $75,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments in excess of $75,000 due under leases required to be
capitalized in accordance with GAAP. None of the Group Companies is, or is
reasonably likely to be, in default with respect to any Indebtedness and no
waiver of default is currently in effect. None of the Group Companies has agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien. None of the Group Companies is a party to,
or
otherwise subject to any provision contained in, any instrument evidencing
Indebtedness of any of the Group Companies, any agreement relating thereto
or
any other agreement (including, but not limited to, its Charter Document) which
limits the amount of, or otherwise imposes restrictions on the incurring of,
Indebtedness of the Company.
2. Covenants
and Agreements.
Unless
the context requires otherwise, each Group Company hereby covenants and agrees,
and the Controlling Shareholder hereby covenants and agrees to cause each Group
Company to do, as follows:
2.1 Periodic
Reports and Other Information.
As long
as Citadel holds Convertible Notes then outstanding (including the principal
amount of the Convertible Notes converted into Conversion Shares as if such
conversion had not taken place and to the extent such Conversion Shares are
held
by Citadel at the time of calculating such percentage), the principal amount
of
which is at least 30% of the principal amount of the Convertible Notes then
outstanding (including the principal amount of the Convertible Notes converted
into Conversion Shares as if such conversion had not taken place and to the
extent such Conversion Shares are held by Citadel at the time of calculating
such percentage) (the “Minimum
Holdings”),
the
Company shall furnish to Citadel, to the extent not made publicly available
and
permitted by applicable law and regulations:
(a) Quarterly
Reports.
Within
forty-five (45) days after the end of each fiscal quarter of the Company,
unaudited consolidated quarterly financial statements for such fiscal quarter,
including a balance sheet as of the end of such fiscal quarter, a statement
of
income and a statement of cash flows of the Company for such fiscal quarter,
setting forth in each case in comparative form the figures from the Company’s
previous fiscal year and for the three, six or nine months then ended, as the
case may be, prepared in accordance with generally accepted accounting
principles (“GAAP”)
applied on a consistent basis (except as noted) and reviewed by internationally
recognized independent certified public accountants, which fairly present the
financial condition, results of operations and cash flows of the Company at
the
date thereof and for the periods covered thereby;
(b) Annual Reports.
Within
ninety (90) days after the end of each fiscal year of the Company, audited
consolidated annual financial statements for such fiscal year, including a
balance sheet as of the end of such fiscal year, a statement of income and
a
statement of cash flows of the Company for such year, setting forth in each
case
in comparative form the figures from the Company’s previous fiscal year, if any,
prepared in accordance with GAAP applied on a consistent basis (except as noted)
and audited by internationally recognized independent certified public
accountants, which fairly present the financial condition, results of operations
and cash flows of the Company at the date thereof and for the periods covered
thereby;
(c) Business
Plan and Annual Budget.
The
Company shall prepare and submit to Citadel and the Board for their approval
at
least thirty (30) days prior to the beginning of the next financial year or
period the annual budget (“Annual
Budget”)
of the
Company and its Subsidiaries on a consolidated basis setting out in reasonable
detail the planned annual
capital and operating budgets in reasonable detail, projected
revenues, a
projected financial statement for such fiscal year on a quarterly basis, and
promptly after preparation from time to time, any revisions to the forecasts
contained therein
of the
Company and its Subsidiaries and attaching thereto such notes as are necessary,
desirable or customary, together with a business plan setting forth in
reasonable detail the operating goals of the Company and its Subsidiaries for
the following year (the “Business
Plan”).
(d) If
at any
time the results of operations of Dalian Fushi are not consolidated for
accounting purposes with the results of operations of the Company, and if at
such time the Company maintains a commercial relationship with Dalian Fushi
that
is either substantially similar to the commercial relationship between the
Company and Dalian Fushi as of the date hereof, or that is otherwise material
to
the results of operations, financial condition or cash flows of the Company,
Dalian Fushi shall provide to Citadel substantially the same financial
statements, budget, plans and information of Dalian Fushi as set forth in the
immediately foregoing clauses (a) through (c) with respect to Dalian Fushi
at
the same time and in the same manner as therein set forth.
2.2 Inspection.
As long
as Citadel holds the Minimum Holdings,
each
Group Company shall permit Citadel and any authorized representative thereof,
to
visit and inspect the properties of such Group Company, including its corporate
and financial records, to examine its records and make copies thereof and to
discuss its affairs, finances and accounts with its officers, at all such
reasonable times and as
often
as may be reasonably requested upon
reasonable notice,
provided
that
such visits and inspections shall not unduly interrupt the daily operation
of
such Group Company. Citadel and its participating agents and representatives,
in
exercising its rights of inspection hereunder, agrees to maintain the
confidentiality of all financial and other confidential information of such
Group Company acquired by them. If requested by such Group Company, Citadel,
in
exercising its rights under this Section 2.2 shall execute a confidentiality
agreement with such Group Company in such reasonable form and substance as
agreed between Citadel and such Group Company.
2.3 FCPA.
Each
Group Company and the Controlling Shareholder shall, and shall cause each Group
Company, any of the Company’s Subsidiaries and their respective management to,
(i) comply with the U.S. Foreign Corrupt Practices Act of 1977, as amended,
and
the rules and regulations thereunder (the “FCPA”),
including, without limitation, not making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of value to
any
“foreign official” (as the term is defined in the FCPA) or any foreign political
party or official thereof or any candidate for foreign political office, in
contravention of the FCPA, (ii) conduct each such company’s respective business
in compliance with the FCPA, and (iii) institute and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue
to
ensure, continued compliance therewith.
2.4 Qualifying
IPO.
To the
extent not inconsistent with the terms of the Indentures, the Company shall
use
its best efforts to effect, and the Controlling Shareholder shall cause the
Company to effect, a Qualifying IPO on or before July 18, 2008. In addition,
the
Company and the Controlling Shareholder shall use their respective best efforts
to cause the Company’s Board to effect the Qualifying IPO. For
purposes of this Section
2.4,
the
terms “Closing
Sale Price”,
“Permitted
Holders”
and
“Qualifying
IPO”
shall
have the respective meanings ascribed to them in the indenture for the
Convertible Notes as of the date hereof (the “CB
Indenture”).
2.5 PFIC.
No
Group Company shall, and the Controlling Shareholder shall cause each Group
Company not to, become a “passive foreign investment company” within the meaning
of Section 1297 of the U.S. Internal Revenue Code of 1986.
2.6 OFAC.
Neither
any Group Company nor, to the knowledge of any Group Company, any director,
officer, agent, employee, Affiliate or Person acting on behalf of any Group
Company is currently subject to any U.S. sanctions administered by the Office
of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and
no Group Company shall, and the Controlling Shareholder shall cause each Group
Company not to, directly or indirectly use the proceeds of the sale of the
Notes, or lend, contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other Person or entity, for the purpose
of
financing the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.
2.7 Money
Laundering Laws.
Each of
the Group Companies shall, and the Controlling Shareholder shall cause each
Group Company to, conduct its operations at all times in compliance with the
money laundering statutes of applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable governmental agency.
2.8 Escrow
Agreements.
The
Company shall, and the Controlling Shareholder shall ensure that the Company
shall, at all times comply with the terms and conditions of the Offshore Escrow
Agreement. The WFOE shall, and the Company, FHI and the Controlling Shareholder
shall ensure that the WFOE shall, at all times comply with the terms and
conditions of the Onshore Escrow Agreement.
2.9 Other
Covenants.
As long
as Citadel holds the Minimum Holdings,
each
Group Company hereby covenants and agrees, and the Controlling Shareholder
hereby covenants and agrees to cause each Group Company to do, as follows,
unless Citadel otherwise provides prior written consent in its sole discretion
(the term “Subsidiary”
as
referred to in this Agreement shall include any Subsidiary of the Company and
Dalian Fushi):
(a) No
Group
Company shall change
the substantive responsibilities of any member of the Senior Management of
such
Group Company and
its
Subsidiaries, or substitute any other Person to perform the substantive
responsibilities of such members of Senior Management as they are performed
as
of the date hereof, other than in the case of incapacity of such member of
Senior Management.
(b) No
Group
Company or its Subsidiaries shall issue
any
securities, create any security interest or enter
into any transaction or a series of related transactions the completion of
which
will result in a Change of Control of the Company. “Change
of Control”
shall
have the meaning as defined in the CB Indenture.
(c) No
Group
Company or its Subsidiary shall change
the
number of members
of the board
of
directors
(“Board”)
of
such Group Company or its Subsidiaries, or the composition or structure of
the
board or board committees of the Group Company or its Subsidiaries or establish
board committees of such Group Company or its Subsidiaries, or delegate powers
of any Board to a committee, or change the powers, duties or responsibilities
delegated to any committee of the Board of such Group Company.
(d) No
Group
Company shall amend,
alter, waive or repeal any provision of such Group Company’s or its
Subsidiaries’ certificate of incorporation, memorandum and articles of
association or any other organizational or constitutional documents of such
Group Company or its Subsidiaries.
(e) The
Company shall retain independent public accountants (the “Accountants”)
of
recognized international standing and acceptable to Citadel who shall certify
the Company’s consolidated financial statements, and Dalian Fushi’s financial
statements in case Dalian Fushi’s financials are not consolidated into the
Company’s financial statements according to GAAP, each at the end of each fiscal
year. The Company shall not terminate the services of the Accountants without
Citadel’s prior written approval. In the event that the Accountants elect to
terminate their services to the Company, the Company shall provide Citadel
with
a written notice prior to such resignation if reasonably practicable and if
not,
promptly thereafter notify Citadel and in any event shall request the
Accountants to deliver to Citadel a letter from the Accountants setting forth
the reasons for the termination of their services. In the event of such
termination, the Company shall promptly thereafter engage another firm of
independent public accountants of recognized international standing acceptable
to Citadel to be the new Accountants. In its notice to Citadel, the Company
shall state whether the change of Accountants was recommended or approved by
the
Company’s Board or any committee thereof.
(f) No
Group
Company or its Subsidiaries shall approve
any
Annual Budget or Business Plan of such Group Company and its
Subsidiaries
without
the prior written approval of Citadel,
or
approve any capital expenditure budget of such Group Company and its
Subsidiaries without
the prior written approval of Citadel (the “Approved
Budget”).
No
Group Company shall expend any money in any financial year or period except
in
accordance with the Approved Budget; provided
that in
any given year the amount of the total actual capital expenditures may not
exceed the Approved Budget for such year by more than 10% of the Approved Budget
without Citadel’s prior written consent.
(g) No
Group
Company
or its Subsidiaries
shall
enter into any activities which
are
not in the ordinary course of business of such Group Company or such Subsidiary,
as the case may be, and that would have a material adverse effect on the
interests of Citadel.
(h) Each
Group Company shall use its best efforts to keep its properties and those of
its
Subsidiaries in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each Group
Company and its Subsidiaries shall at all times comply with each material
provision of all leases to which any of them is a party or under which any
of
them occupies property if the breach of such provision might have a material
and
adverse effect on the condition, financial or otherwise, or operations of such
Group Company and its Subsidiaries, taken as a whole.
(i) Except
as
otherwise decided in accordance with policies adopted by its Board, each Group
Company shall keep its assets and those of its Subsidiaries that are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against
by
companies in such Group Company’s line of business, and each Group Company shall
maintain, with financially sound and reputable insurers, insurance against
other
hazards and risks and liability to Persons and property to the extent and in
the
manner customary for companies in similar businesses similarly
situated.
(j) No
Group
Company or its Subsidiaries shall, without the prior written consent of Citadel,
which shall not be unreasonably withheld, acquire or dispose of any shares
or
debt or equity securities of any corporation or other entity or acquire any
other business as a going concern, by one transaction or a series of
transactions, or form any partnership or joint venture with any other
Person.
(k) No
Group
Company shall change the nature of operations or the business of such Group
Company and its Subsidiaries.
(l) In
addition to the provisions set forth in Section 4.09(b) of the Indentures,
each
of the Group Companies and the Controlling Shareholder shall obtain Citadel’s
written consent prior to increasing the aggregate principal amount of all of
the
Debt of the WOFE under Credit Facilities up to $25.0 million (or its equivalent
in another currency) as set forth in Section 4.09(b) of the
Indentures.
(m)
Prior to
the Closing, the WFOE shall, and the Company, FHI and the Controlling
Shareholder shall use their respective best efforts to cause the WFOE to, enter
into the Onshore Escrow Agreement to set up an escrow account in the name of
the
WFOE, and the Company shall, and the Controlling Shareholder shall use his
best
efforts to cause the Company to, enter into the Offshore Escrow Agreement to
set
up an escrow account in the name of the Company, in each case for deposit of
the
proceeds of the Notes to only be drawn down with prior approval of Citadel
so
long as Citadel holds the Alternative Minimum Holdings, or upon satisfaction
of
certain conditions to be agreed upon by Citadel.
2.10
Each of
the Company, Citadel and their respective Affiliates shall not directly or
indirectly transact, or induce or procure any other Person to transact, any
purchase or sale in any shares of Common Stock during the fifteen (15) Trading
Days (as defined in the CB Indenture) preceding the determination of any Trading
Reference VWAP (as defined in the CB Indenture).
3. Right
of First Refusal for Future Securities Offerings.
3.1 Issuance
Notice.
Subject
to the terms and conditions of this Section
and applicable securities laws, if, following the date hereof and until December
31, 2010, the Company proposes to issue or sell any securities to a purchaser
that is not an Affiliate of the Company (the “Proposed
Third Party Purchaser”),
the
Company shall, not less than fifteen (15) business days prior to the
consummation of such issuance or sale, offer such securities to Citadel as
long
as Citadel holds at least 10% of the outstanding HY Notes, 20% of the
outstanding Convertible Notes (including the principal amount of the Convertible
Notes that have been converted into Conversion Shares as if such conversion
had
not taken place and to the extent that such Conversion Shares are held by
Citadel at the time of calculating such percentage) or 3% of the total
outstanding equity interest in the Company on a fully-diluted basis (including,
for the avoidance of doubt, any Conversion Shares) (the “Alternative
Minimum Holding”)
by
sending written notice (an “Issuance
Notice”)
to
Citadel, which shall state (a)
the
identity of the Proposed Third Party Purchaser, (b) a description of the
securities to be issued or sold, including detailed terms of such securities,
(c) the amount of the securities proposed to be issued to the Proposed Third
Party Purchaser (the “Offered
New Securities”);
(d)
the proposed purchase price for the Offered Securities (the “Issuance
Price”);
and
(e) the terms and conditions of such proposed sale.
The
Issuance Notice shall also certify that the Company has received a firm offer
from the Proposed Third Party Purchaser and in good faith believes a binding
agreement for the Offered New Securities is obtainable on the terms set forth
in
the Issuance Notice. The Issuance Notice shall also include a copy of any
written proposal, term sheet or letter of intent or other agreement or
understanding relating to the Offered New Securities and proof satisfactory
to
the Company that the Offered New Securities will not violate any applicable
securities laws. Upon delivery of the Issuance Notice, such offer shall be
irrevocable unless and until the rights of first refusal provided for herein
shall have been waived or shall have expired.
3.2 Option;
Exercise.
By
notification to the Company within fifteen (15) business days after the Issuance
Notice is given, Citadel may elect to purchase or otherwise acquire, at the
price and on the terms specified in the Issuance Notice, up to all of the
Offered New Securities.
The
closing of any sale pursuant to this Section
3.2
shall
occur within sixty (60) days after the date on which such notification is given
by Citadel.
Citadel
(or its assignees) shall be entitled to apportion the rights of first refusal
hereby granted to it among itself and its Affiliates in such proportions as
it
deems appropriate.
3.3 If
less
than all of the Offered New Securities are elected to be purchased or acquired
as provided in Section
3.2,
the
Company may, during the thirty (30) day period following the expiration of
the
15-day period provided in Section
3.2,
offer
and sell the remaining unsubscribed portion of such securities to the Proposed
Third Party Purchaser in the Issuance Notice at a price not less than, and
upon
terms no more favorable to the Proposed Third Party Purchaser than, those
specified in the Issuance Notice. If the Company does not enter into an
agreement for the sale of such securities within such period, or if such
agreement is not consummated within thirty (30) days after the execution
thereof, the right of first refusal provided hereunder shall be deemed to be
revived and such securities shall not be offered to a third party unless first
reoffered to Citadel in accordance with this Section.
4. Right
of First Refusal for Controlling Shareholder’s Transfer and Tag-Along
Right.
4.1 Securities
Notice.
As long
as Citadel holds the Alternative Minimum Holding, subject to Section
4.8
of this
Agreement, if the Controlling Shareholder proposes to sell or transfer any
securities of the Company held by it or any other Permitted Holder to a third
party purchaser (the “Third
Party Purchaser”)
other
than as otherwise agreed by Citadel in writing prior to such sale or transfer,
or in the case of any Exempt Transfer (as defined in Section
4.7
below),
the Controlling Shareholder shall, within fifteen (15) business days prior
to
the consummation of such transfer or sale, offer such securities to Citadel
by
sending written notice (an “Offering
Notice”)
to
Citadel, which shall state (a) the identity of the Third Party Purchaser, (b)
the type and number of such securities proposed to be transferred (the
“Offered
Securities”),
including detailed terms of such securities (if other than Common Stock); (c)
the proposed purchase price per share for the Offered Securities (the
“Offer
Price”);
and
(d) the terms and conditions of such sale. The Offer Price shall in no event
be
less than the Conversion Price, as defined in the CB Indenture. The Offering
Notice shall also certify that the Controlling Shareholder has received a firm
offer from the Third Party Purchaser and in good faith believes a binding
agreement for the Offered Securities is obtainable on the terms set forth on
the
Offering Notice. The Offering Notice shall also include a copy of any written
proposal, term sheet or letter of intent or other agreement or understanding
relating to the Offered Securities and proof satisfactory to the Company that
the Offered Securities will not violate any applicable securities laws. Upon
delivery of the Offering Notice, such offer shall be irrevocable unless and
until the rights of first refusal provided for herein shall have been waived
or
shall have expired.
4.2 Option;
Exercise.
For a
period of fifteen (15) business days after the giving of the Offering Notice
pursuant to Section
4.1
(the
“Option
Period”),
Citadel shall have the right to purchase all or any part of the Offered
Securities at a purchase price equal to the Offer Price and upon terms and
conditions no less favorable than those set forth in the Offering Notice.
Citadel may assign to any of its Affiliates (other than a Person engaged in
the
Business) all or any portion of its rights pursuant to this
Section.
4.3 The
right
of Citadel to purchase all or any part of the Offered Securities under
Section
4.2
above
shall be exercisable by delivering written notice of the exercise thereof (the
“ROFR
Exercise Notice”),
prior
to the expiration of the Option Period, to the Controlling Shareholder. Such
notice shall state the number of Offered Securities that Citadel is willing
to
purchase pursuant to this Section. The failure of Citadel to respond within
the
Option Period to the Controlling Shareholder shall be deemed to be a waiver
of
Citadel’s rights under Section
4.1
above,
provided
that
Citadel may waive its rights under Section
4.2
above
prior to the expiration of the Option Period by giving written notice to the
Controlling Shareholder.
4.4 Closing.
The
closing of the purchases of Offered Securities subscribed for by Citadel under
Section
4.3
shall be
held at the executive office of the Company at 11:00 a.m., local time, on the
30th day after the giving of the ROFR Exercise Notice pursuant to Section
4.3
or at
such other time and place as the parties to the transaction may agree. At such
closing, the Controlling Shareholder shall deliver certificates representing
the
Offered Securities, duly endorsed for transfer and accompanied by all requisite
transfer taxes, if any, and such Offered Securities shall be free and clear
of
any Liens (other than those arising hereunder and those attributable to actions
by the purchasers thereof) and the Controlling Shareholder shall so represent
and warrant, and shall further represent and warrant that it is the sole
beneficial and record owner of such Offered Securities. Citadel shall deliver
at
the closing payment in full in immediately available funds for the Offered
Securities purchased by it or its Affiliates. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate.
4.5 Sale
to a Third Party Purchaser.
Unless
Citadel elects to purchase all of the Offered Securities under Section
4.2,
the
Controlling Shareholder may, subject to Section
4.8,
sell
the remaining Offered Securities not purchased by Citadel to the Third Party
Purchaser identified in the Offering Notice at a price not less than the Offer
Price, and on terms not more favorable than the terms set forth in the Offering
Notice; provided,
however,
that
such sale is bona fide and made pursuant to a contract entered into within
thirty (30) days after the earlier to occur of (i) the waiver by Citadel of
its
right to purchase the Offered Securities and (ii) the expiration of the Option
Period (the “Contract
Date”);
and
provided
further,
that
such sale shall not be consummated unless and until (x) such Third Party
Purchaser shall represent in writing to Citadel that it is aware of the rights
of Citadel contained in this Agreement and (y) prior to the purchase by such
Third Party Purchaser of any of such Offered Securities, such Third Party
Purchaser shall become a party to this Agreement and agree to be bound by the
terms and conditions hereof that are applicable to the Controlling Shareholder,
provided that if such Third Party Purchaser, together with any other Third
Party
Purchasers and on an aggregated basis, owns less than 10% of the Company's
outstanding capital stock on an as-converted, fully diluted basis following
such
sale, then such Third Party Purchaser shall not be bound by Sections 1, 2,
3 and
6 of this Agreement. If such sale is not consummated within thirty (30) days
after the ealier to occur of (i) the waiver by Citadel of its options to
purchase the offer and (ii) the Contract Date for any reason, then the
restrictions provided for herein shall again become effective, and no transfer
of such Offered Securities may be made thereafter by the Controlling Shareholder
without again offering the same to Citadel in accordance with this
Section.
4.6 Tag-Along
Right.
(a) If
the Controlling Shareholder is directly or indirectly transferring Offered
Securities to a Third Party Purchaser pursuant to Section
4.5,
then
Citadel shall have the right to sell to such Third Party Purchaser that number
of Shares (or Convertible Notes representing as closely as possible such number
of shares held by Citadel) equal to that percentage of the Offered Securities
determined by dividing (i) the total number of outstanding shares of the Common
Stock of the Company (the “Shares”)
(on an
as-converted basis) then owned by Citadel by (ii) the sum of (x) the total
number of Shares (on an as-converted basis) then owned by Citadel and (y) the
total number of Shares then owned by the Controlling Shareholder, at a price
equal to the Offer Price (in the case of sale of Conversion Shares) or the
Offer
Price less the then applicable Conversion Price (in the case of the sale of
the
Convertible Notes), with other terms set forth in the Offering Notice;
provided
that if
the Offer Price is less than the then applicable Conversion Price the Conversion
Shares shall be transferred at the Offer Price. The Controlling Shareholder
and
Citadel shall effect the sale of the Offered Securities and Citadel shall sell
the number of Offered Securities to be sold by it pursuant to this Section,
and
the number of Offered Securities to be sold to such Third Party Purchaser by
the
Controlling Shareholder shall be reduced accordingly.
(b)
The
Controlling Shareholder shall give notice to Citadel of each proposed sale
by
it, or any other Permitted Holder of Offered Securities which gives rise to
the
rights of Citadel set forth in this Section, at least fifteen (15) business
days
prior to the proposed consummation of such sale, setting forth the type and
number of Offered Securities, including detailed terms of such securities (if
other than Common Stock), the name and address of the proposed Third Party
Purchaser, the proposed amount and form of consideration and terms and
conditions of payment offered by such Third Party Purchaser, the percentage
of
shares of Common Stock that Citadel may sell to such Third Party Purchaser
(determined in accordance with Section
4.6(a)),
and a
representation that such Third Party Purchaser has been informed of the
“tag-along” rights provided for in this Section and has agreed to purchase
Offered Securities in accordance with the terms hereof. The tag-along rights
provided by this Section must be exercised by Citadel within fifteen (15)
business days following receipt of the notice required by the preceding
sentence, by delivery of a written notice to the Controlling Shareholder
indicating Citadel’s election to exercise its rights and specifying the number
of shares of Common Stock (up to the maximum number of shares of Common Stock
owned by Citadel required to be purchased by such Third Party Purchaser) it
elects to sell (the “Tag-along
Exercise Notice”),
provided
that
Citadel may waive its rights under this Section prior to the expiration of
such
fifteen (15) business day period by giving written notice to the Controlling
Shareholder, with a copy to the Company. The failure of Citadel to respond
within such fifteen (15) business day period shall be deemed to be a waiver
of
Citadel’s rights under this Section. If a Third Party Purchaser fails to
purchase shares of Common Stock from Citadel, notwithstanding Citadel’s proper
exercise of its tag-along rights pursuant to this Section
4.6(b),
then
the Controlling Shareholder shall either contemporaneously purchase from Citadel
at the Offer Price such number of shares of Common Stock as the Third Party
Purchaser failed to purchase from Citadel, or if the Controlling Shareholder
does not so purchase, it shall not be permitted to consummate the proposed
sale
of the Offered Securities, and any such attempted sale shall be null and void
ab
initio.
4.7 Exempt
Transfers.
The
right of first refusal and tag-along rights set forth in this Section
4
shall
not apply to (i) any transfer to a Permitted Holder; provided
that
adequate documentation therefor is provided to Citadel to its satisfaction
and
that any such Permitted Holder agrees in writing to be bound by this Agreement
in place of the relevant transferor; provided,
further,
that
such transferor shall remain liable for any breach by such Permitted Holder
of
any provision hereunder,
(ii)
the sale in an unsolicited broker’s transaction pursuant to Rule 144 under the
Securities Act of 1933, as amended, or (iii) the Transfer (as defined below)
by
the Controlling Shareholder of no more than 3% (on an aggregated basis over
the
term of the Notes) of the total outstanding equity interest in the Company
on a
fully-diluted basis if, after such Transfer, the Controlling Shareholder still
holds no less than 35% of the total outstanding equity interest in the Company
on a fully diluted basis (the “Exempt
Transfers”).
“Transfer”
shall
mean sell, transfer, assign, pledge, hypothecate, dispose of, mortgage, enter
into any voting trust or other agreement, option or other arrangement or
understanding with respect thereto, whether directly or indirectly and whether
voluntarily or involuntarily.
4.8 Prohibited
Transfers.
(a)
Notwithstanding anything to the contrary contained herein, to the extent
permitted under applicable law, the Controlling Shareholder shall not, and
the
Controlling Shareholder shall cause the Permitted Holder not to, without the
prior written consent of Citadel, which consent shall not be unreasonably
withheld, Transfer through one or a series of transactions any securities of
the
Company to any Person unless Citadel has sold more than 5% of the total
outstanding equity interest in the Company on a fully diluted basis,
provided
that the
foregoing provision shall not apply to any Exempt Transfer.
(b)
The
Controlling Shareholder shall ensure that no other Permitted Holder shall sell
or transfer securities of the Company held by such Permitted Holder other than
through the Controlling Shareholder as provided in this Agreement. Any attempt
by the Controlling Shareholder or any other Permitted Holders to sell or
transfer any securities of the Company held by it or any other Permitted Holder
in violation of this Section shall be void and the Company hereby agrees it
will
not effect such a transfer on its share register nor will it treat any alleged
transferee as the holder of such shares.
5. Board
Representation.
5.1 Number
of Board Members.
The
Company shall, effective upon Closing and until the termination of this
Agreement, take all appropriate actions to fix and maintain a Board of no more
than seven (7) voting members and the Company shall not change the number of
voting members of its Board without Citadel’s prior written
approval.
5.2 Citadel
Nominees.
Upon
the Citadel Election (as defined below), so long as Citadel continues to hold
more than 5% of the outstanding shares of Common
Stock on
an
as-converted basis, it shall be entitled to appoint up to 20% of the voting
members (or the next higher whole number if such percentage does not yield
a
whole number) of the Company’s Board (each a “Citadel
Nominee”
and
together, the “Citadel
Nominees”).
If,
however, there occurs any Financial and Operational Trigger (as defined in
the
CB Indenture) while Citadel holds more than 5% of the outstanding shares of
Common
Stock on
an
as-converted basis, Citadel shall be eligible to appoint an additional voting
member of the Company’s Board, provided
however,
that
Citadel shall have the right to appoint only one additional voting member of
the
Company’s Board irrespective of the number of times a Financial and Operational
Trigger occurs.
5.3 Board
Committees.
The
Company shall not, without the prior written consent of Citadel, establish
any
committee of its Board, delegate powers of its Board to a committee, or change
the powers, duties or responsibilities delegated to any committee of the Board
of the Company. To
the
extent permitted by applicable law and exchange listing rules, Citadel
Nominees shall be entitled to be members of all committees of the boards of
directors of the Company and its Subsidiaries, if any.
5.4 Citadel
Election.
If
Citadel provides written notice to the Company informing the Company of (i)
its
election (the “Citadel
Election”)
to be
represented on the Board and (ii) the name(s) of the Citadel Nominee(s), then,
as soon as practicable after its receipt of such notice from Citadel, but in
no
event later than five (5) business days after such receipt, the Company shall:
(a) provide
notice of the Citadel Election to the Company’s Board and the Controlling
Shareholder, and
(b) to
the
extent permissible under applicable laws and regulations (including rules of
any
relevant listing exchange), take all necessary actions so as to permit the
Citadel Nominee(s) to be duly appointed or elected as members of the Company’s
Board as soon as practicable.
Subject
to the conditions and limitations set forth herein, the Citadel Election may
be
exercised by Citadel at any time in its sole discretion.
5.5 Voting
Agreement.
The
Controlling Shareholder agrees to vote, or cause to be voted, all of the
Company’s Shares owned by such Controlling Shareholder or any other Permitted
Holder (of record or through a brokerage firm or other nominee arrangement),
or
over which the Controlling Shareholder has voting control, from time to time
and
at all times, in whatever manner as shall be necessary to ensure that at each
annual or special meeting of shareholders at which an election of directors
is
held or pursuant to any written consent of the shareholders, the Citadel
Nominees are duly elected to the Board.
The
Controlling Shareholder further covenants not to frustrate the purpose of the
immediately preceding sentence by any means, including through entering into
any
agreement or commitment inconsistent with such purpose, including but not
limited to any inconsistent pledge, charge, hypothecation, voting agreement,
voting trust or other disposition of voting rights of the Common Stock over
which the Controlling Shareholder retains beneficial ownership or the economic
benefits and risks attendant thereto.
5.6 Vacancies.
Any
vacancies created by the resignation, removal or death of a Citadel Nominee
appointed or elected to the Board shall be filled pursuant to the provisions
of
this Section.
5.7 Quorum.
The
Company shall not hold any meeting of the Board without the attendance of at
least one of the Citadel Nominee(s), provided
that
Citadel Nominee(s) shall exercise good faith efforts to attend each Board
meeting in order to meet the quorum requirement provided in this Section,
including a good faith effort to attend by telephone or in person.
5.8 Reimbursement.
Each
time Citadel Nominee(s) attend a face-to-face meeting of the Board, the Company
shall reimburse such director for reasonable travel expenses on the same basis
as the other members of the Board.
6. Non-Competition.
6.1 Non-competition
and Non-solicitation.
During
the period commencing as of the date hereof and until the fifth anniversary
of
the Closing Date (such period, the “Non-compete
Term”),
each
member of the Senior Management
hereby
agrees that such Person will not, to the extent permitted by applicable laws,
directly or indirectly, engage in, or have any interest in, any Person, firm,
corporation, or business (whether as an executive, officer, director, agent,
security holder, consultant, investor or similar position) that engages in
a
Competitive Business, or otherwise interfere with the business of the Company
or
any Company Affiliates, including without limitation:
(a) either
on
his own behalf or on behalf of any other Person, solicit business similar to
the
Business from any customer, supplier, distributor of, or a Person in a similar
commercial relationship with, the Company or Company Affiliates; or
(b) either
on
his own behalf or on behalf of any other Person, solicit, employ or otherwise
engage as an employee, independent contractor, or otherwise any Person who
is
and was, at any time during one year prior to such solicitation, employment
or
engagement, an employee of the Company or Company Affiliates, or in any manner
induce any employee of the Company or Company Affiliates to terminate his or
her
employment therewith;
Notwithstanding
the foregoing paragraphs of this Section:
(i) Each
member of the Senior Management may own, as an investor, holdings as part of
a
portfolio investment through mutual funds or other funds pooling investments
in
different corporations (the stock of which is publicly traded) some of which
may
be engaging in a Competitive Business, in each case when any and all the
investment and voting decisions with respect to such voting stock are made
by
unaffiliated third party fund managers;
(ii) Each
member of the Senior Management
may
continue his involvement as a shareholder, officer and/or director of the
entities as set forth in the Disclosure Schedules to the
Notes
Purchase
Agreement, which represents the pre-existing relationships disclosed by the
Company; and
(iii) Each
member of the Senior Management
may
serve as a shareholder, director or officer of any entity that is not engaged
in
a Competitive Business.
6.2 Continued
Employment.
Each
member of the Senior Management agrees that during the Non-compete Term to
the
extent permitted under applicable law, (a) except in the event of an involuntary
termination, he shall continue to provide the same substantive services for
the
Company as he is responsible for on the date hereof and, if applicable, to
the
other Group Companies or the Subsidiaries; and (b) he shall not voluntarily
resign as a director of the Company and, if applicable, to the other Group
Companies or the Subsidiaries, in each case without Citadel’s prior written
consent.
6.3 Confidentiality
and Other Covenants.
Each
member of the Senior Management
agrees
that:
(a) he
shall
keep confidential any information, including Trade Secrets, relating to the
Company, Company Affiliates, and the Business (unless such disclosure is
permitted in writing by the Company, required under law or by order of any
governmental or regulatory authority, or relates to information already in
the
public domain, or is rightfully obtained from a third party without breach
of
any confidentiality obligation);
(b) all
Work
Product of any member of
the
Senior Management
conceived (whether solely or jointly with others) within the scope of his
employment with the Company belongs to the Company and any and all of his rights
to such Work Product, to the extent not yet assigned, are hereby assigned to
the
Company;
(c) upon
the
termination of his employment with the Company, at the request of the Company,
he shall return to the Company all of the Company’s proprietary items in his
possession or under his control and shall not retain any copies or other
physical embodiment of any of such items; and
(d) upon
the
termination of his employment with the Company, he shall not hold himself out
as
an employee, agent or representative of the Company.
6.4 Termination.
The
parties agree that the Non-Compete Term shall terminate, and this Section shall
be deemed terminated and of no further effect, without necessity of further
action by the parties hereto, upon the earlier to occur of (i) the payment
in
full of the Notes on the latest maturity date of the Notes; or (ii) the
redemption or repurchase of the Notes in full by the Company, provided
that
the
Non-Compete Term shall continue for a period of no longer than five (5) years
fron the Closing Date so long as Citadel holders the Alternative Minimum
Holding.
6.5 Definitions.
For the
purpose of this Section, capitalized terms used in this Section shall have
the
meanings set forth below:
(a) “Business”
shall
mean the
manufacture and sale of bimetallic wire used in communications, electrical
transmission and other electrical products, services ancillary thereto, and
the
sourcing and manufacture of raw materials and inputs for such
products.
(b) “Company
Affiliate”
shall
mean any entity engaged in the Business which is controlled by or under common
control with the Company, the Controlling Shareholder or any member of
the
Senior Management.
(c) “Competitive
Business”
shall
mean any business that competes with the Business.
(d) “Trade
Secret”
shall
mean any information, including, but not limited to, technical or non-technical
data, formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans, actual
or
future services, or lists of actual or potential customers or suppliers that
(1)
derive economic value, actual or potential, from not being generally known
to,
and not being readily ascertainable by proper means by, other Persons who can
obtain economic value from their disclosure or use, and (2) are the subject
of
efforts that are reasonable under the circumstances to maintain their
secrecy.
(e) “Work
Product”
shall
mean all intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable inventions, discoveries and improvements,
and other intellectual property rights, in any documentation, programming,
technology, or other work that relates to the business and interests of the
Company and that was or is conceived or developed by any member of
the
Senior Management,
or
delivered by any member of
the
Senior Management
to the
Company at any time during the term of such member of the Senior
Management’s
employment with the Company.
7. Indemnification.
(a) In
addition to all rights and remedies available to Citadel at law or in equity,
each Group Company and the Controlling Shareholder shall jointly and severally
indemnify Citadel, and its Affiliates, stockholders, officers, directors,
employees, agents, representatives, successors and permitted assigns
(collectively, the “Indemnified
Parties”)
and
save and hold each of them harmless against and pay on behalf of or reimburse
such party as and when incurred for any loss (including, without limitation,
diminutions in value), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax, penalty, fine or expense, whether or not arising out
of
any claims by or on behalf of any third party, including interest, penalties,
reasonable attorneys’ fees and expenses and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing (collectively,
“Losses”)
which
any such party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) any
misrepresentation or breach of a representation or warranty on the part of
any
Warrantor herein;
(ii) any
nonfulfillment or breach of any covenant or agreement on the part of any Group
Company, the Controlling Shareholder or any member of the Senior Manegement
herein; or
(iii) any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental agencies) against or affecting
any
Group Company and/or its Affiliates or Subsidiaries which, if successful, would
give rise to or evidence the existence of or relate to a breach of (A) any
of
the representations or warranties at the time made or (B) covenants of such
Group Company, the Controlling Shareholder or any member of the Senior
Manegement.
(b) Notwithstanding
the foregoing, and subject to the following sentence, upon judicial
determination, which is final and no longer appealable, that the act or omission
giving rise to the indemnification hereinabove provided resulted primarily
out
of or was based primarily upon the Indemnified Party’s gross negligence, fraud
or willful misconduct (unless such action was based upon the Indemnified Party’s
reliance in good faith upon any of the representations, warranties, covenants
or
promises made by any Warrantor herein) by the Indemnified Party, neither any
Group Company nor the Controlling Shareholder shall be responsible for any
Losses sought to be indemnified in connection therewith, and each Group Company
and the Controlling Shareholder shall be entitled to recover from the
Indemnified Party all amounts previously paid in full or partial satisfaction
of
such indemnity, together with all costs and expenses of such Group Company
and
the Controlling Shareholder reasonably incurred in effecting such recovery,
if
any.
(c) All
indemnification rights hereunder shall survive indefinitely, regardless of
any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of Citadel and/or any of the other Indemnified Parties.
(d) The
indemnity obligations that each Group Company and the Controlling Shareholder
has under this Section shall be in addition to any liability that such Group
Company and the Controlling Shareholder may otherwise have.
8. Miscellaneous.
8.1 Termination.
Except
for Sections
7
and
8,
which
shall survive the termination of this Agreement, or as otherwise expressly
provided herein, this Agreement will be automatically terminated with no further
effect at such time that Citadel no longer holds at least the Alternative
Minimum Holding.
8.2 Specific
Enforcement.
Upon a
breach by the Controlling Shareholder, any member of
the
Senior Management
or any
Group Company of this Agreement, in addition to any such damages as Citadel
is
entitled to, directly or indirectly, by reason of said breach, Citadel shall
be
entitled to injunctive relief against the Controlling Shareholder or such member
of
the
Senior Management
or such
Group Company if such relief is applicable and available, as a remedy at law
would be inadequate and insufficient. Nothing in this Section shall be construed
as limiting Citadel’s remedies in any way.
8.3 Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing and shall be personally delivered or delivered by overnight courier
or
mailed by first-class registered or certified mail, postage prepaid, return
receipt requested, or by facsimile transmission. Every notice hereunder shall
be
deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, upon transmission by facsimile and
confirmed facsimile receipt, or two (2) days after the same shall have been
deposited with a reputable international overnight courier.
(a) If
to
Citadel, at its address as set forth in the Notes Purchase Agreement, or at
such
other address as may have been furnished to the Company by it in
writing.
(b) If
to the
Controlling Shareholder or any member of
the
Senior Management,
at the
address set forth on Schedule
I
to this
Agreement, or at such other address as may have been furnished to the Company
by
it in writing.
(c) If
to the
Company at:
Fushi
International, Inc.
1
Shuang
Qiang Road
Jinzhou,
Dalian
People’x
Xxxxxxxx xx Xxxxx 000000
Fax:
x00
00 0000 0000
Attention:
Mr. Xxxxx Xxxxxxx Xxxx
with
a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
x0
000 000 0000
Attention:
Xxxxxx X. Xxxxxx, Esq.
8.4 Amendments
and Waiver.
Unless
otherwise specifically stated herein, any term of this Agreement may be amended
with the written consent of the party against whom enforcement may be sought
and
the observance of any term of this Agreement may be waived (either generally
or
in a particular instance and either retroactively or prospectively) by the
Company and the Controlling Shareholder, in the case of Citadel’s obligations,
and by Citadel in the case of the obligations of any other parties hereto.
No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.
8.5 Entire
Agreement.
This
Agreement embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof.
8.6 Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement
to the extent permitted by law.
8.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
8.8 Successors
and Assigns.
Except
as otherwise provided herein, the terms and conditions of this Agreement shall
be binding upon, and inure to the benefit of, the respective representatives,
successors and assigns of the parties hereto. Unless otherwise provided herein,
Citadel
may
assign its rights hereunder to any of
its
Affiliates
(as
defined below).
For
purposes of this Agreement, an “Affiliate”
shall
refer to: (i) any Person directly or indirectly controlling, controlled by
or
under common control with another Person, (ii) any Person owning or controlling
50% or more of the outstanding voting securities of such other Person, (iii)
any
officer, director or partner of such Person, (iv)
a trust
for the benefit of such Person referred to in the foregoing clause (ii) of
this
definition.
8.9 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN
WITNESS WHEREOF, the undersigned have executed this Investor Rights Agreement
as
of the day and year written above.
GROUP COMPANIES: | ||
Fushi International, Inc. | ||
By: __________________________ | ||
Name:
|
||
Title:
|
||
Fushi Holdings, Inc. | ||
By: __________________________ | ||
Name:
|
||
Title:
|
||
Fushi International (Dalian) Bimetallic Cable Co., Ltd. | ||
By:
__________________________
|
||
Name:
|
||
Title:
|
||
Dalian Fushi Bimetallic Manufacturing Co., Ltd. | ||
By: __________________________ | ||
Name:
|
||
Title:
|
CONTROLLING SHAREHOLDER: | ||
By: ________________________ | ||
Mr.
Xx Xx, as Controlling
Shareholder
|
||
SENIOR MANAGEMENT: | ||
By: ________________________ | ||
Mr. Xx Xx, as a member of the Senior Management | ||
By: ________________________ | ||
Xx.
Xxxxxx Xxxx Xxx
|
||
By: ________________________ | ||
Mr.
Xxxxx Xxxx
Wenbing
|
Accepted
and Agreed to:
CITADEL
EQUITY FUND LTD.
By:
Citadel Limited Partnership, its Portfolio Manager
By:
Citadel Investment Group, L.L.C., its General Partner
By:_________________________________
Name:
Title:
Authorized Signatory
Schedule
I
Addresses
of Controlling Shareholder and Senior Management:
x/x
Xxxxx
Xxxxxxxxxxxxx, Xxx., 0 Xxxxxx Xxxxx Xxxx, Xxxxxxx, Dalian, People’x Xxxxxxxx xx
Xxxxx 000000, Fax: x00 00 0000 0000