AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
Exhibit
99.3
Execution
Version
AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this
“Agreement”) is made and entered into as of June 4,
2008, 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 and Mr. Xxxxx Xxxx Wenbing,
a
resident of Dalian, Liaoning Province in the PRC (together with Mr. Xx Xx,
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 the Investor Rights
Agreement dated as of the January 25, 2007 (the “Original
Agreement”) and
WHEREAS,
the parties to the Original Agreement desire to amend and restate the Original
Agreement in its entirety pursuant to the terms 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 to amend
and restate the Original Agreement in its entirety to read 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 11,988,242 shares of Common Stock (of record or through a
brokerage firm or other nominee arrangement), which constitutes 43.67% of the
outstanding voting power of the Company’s capital stock and (ii) 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 0.73% 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.
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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.
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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.
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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
as follows:
2.1 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.
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2.2 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.
2.3 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.
2.4 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.
2.5 Escrow
Agreements. The Company shall at all times comply with the terms and
conditions of the Offshore Escrow Agreement. The WFOE shall, and the Company
and
FHI shall ensure that the WFOE shall, at all times comply with the terms and
conditions of the Onshore Escrow Agreement.
2.6 Other
Covenants. 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”), each Group Company hereby covenants and agrees 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 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 in a manner that would have a material
adverse effect on the interests of Citadel.
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(b) The
Company shall retain independent public accountants (the “Accountants”)
of
recognized international standing 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. 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 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.
(c) 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.
(d) 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.
(e) No
Group Company shall change the nature of operations or the business of such
Group Company and its Subsidiaries.
2.7 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 New 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.
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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. Non-Competition.
4.1 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:
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(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.
4.2 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.
4.3 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);
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(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.
4.4 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
from the Closing Date so long as Citadel holders the Alternative Minimum
Holding.
4.5 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.
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5. 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 Management
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
Management.
(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.
10
(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.
6. Miscellaneous.
6.1 Termination.
Except for Sections 5 and 6, 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.
6.2 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.
6.3 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.
11
(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.
6.4 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.
6.5 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.
6.6 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.
6.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
6.8 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.
12
6.9 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.]
13
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:
/s/ Xx
Xx
Name:
Xx
Xx
Title:
Chief Executive Officer
Fushi
Holdings, Inc.
By:
/s/ Xx
Xx
Name:
Xx
Xx
Title:
Chief Executive Officer
Fushi
International (Dalian) Bimetallic Cable Co., Ltd.
By:
/s/ Xx
Xx
Name:
Xx
Xx
Title:
Chief Executive Officer
Dalian
Fushi Bimetallic Manufacturing Co., Ltd.
By:
/s/ Xx
Xx
Name:
Xx
Xx
Title:
Chief Executive Officer
CONTROLLING
SHAREHOLDER:
By:
/s/ Xx
Xx
Mr. Xx Xx, as Controlling Shareholder
SENIOR
MANAGEMENT:
By:
/s/ Xx
Xx
Mr.
Xx
Xx, as a member of the
Senior
Management
By:
/s/ Xxxxx Xxxx
Wenbing
Mr.
Xxxxx
Xxxx Wenbing
Accepted
and Agreed to:
CITADEL
EQUITY FUND LTD.
By:
Citadel Limited Partnership, its Portfolio Manager
By:
/s/ Xxxx X.
Xxxxx
Name:
Xxxx X. Xxxxx
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
