ESCROW AGREEMENT
Exhibit
10.2
This
Escrow Agreement (“Agreement”) is made as of May 19, 2009 (the “Execution
Date”) by and between Fushi International, Inc. and Dalian Fushi Bimetallic
Manufacturing Company Ltd. (collectively and separately “Fushi”), Xxxxx
Brothers, Inc., Xxxxx Brothers Securities Corp., and Xxxxx Bros. & Co. Inc.
(collectively and separately “Xxxxx”), and Continental Stock Transfer &
Trust Company (the “Escrow Agent”). Fushi, Xxxxx and the Escrow Agent
are sometimes referred to herein, individually, as a “Party,” and, collectively,
as the “Parties.”
WHEREAS,
Fushi and Xxxxx have entered into a Settlement and Forbearance Agreement and
Release, dated May 19, 2009 (the “Settlement Agreement”) which provides in part
that to ensure the payment of a Judgment of amounts owed by Fushi to Xxxxx, a
stock certificate representing 2,200,000 shares of Fushi Common Stock (the
“Escrow Shares”) shall be delivered to the Escrow Agent (capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Settlement Agreement.);
WHEREAS,
the sale of Escrow Shares may be used to satisfy amounts owed by Fushi pursuant
to a Judgment entered into by the United States District Court for Connecticut
for the District of Connecticut entered in favor of Xxxxx and as more fully
described in the Settlement Agreement;
WHEREAS,
as provided in the Settlement Agreement, the amount of the Judgment may be
adjusted; and
WHEREAS,
this Escrow Agreement sets forth circumstances under which the Escrow Shares can
be released from Escrow.
WHEREAS,
Fushi and Xxxxx desire that the Escrow Agent accept the Escrow Shares, in
escrow, to be held and disbursed as hereinafter provided.
IT
IS AGREED:
1. Appointment of Escrow
Agent. Fushi and Xxxxx hereby appoint the Escrow Agent to act
in accordance with and subject to the terms of this Agreement and the Escrow
Agent hereby accepts such appointment and agrees to act in accordance with and
subject to such terms.
2. Deposit of Escrow
Units. On or before the Effective Date, Fushi shall have
delivered or caused to be delivered to the Escrow Agent certificates
representing the Escrow Shares, along with duly executed blank stock powers with a medallion signature guarantee and the
Irrevocable Transfer Agent Instructions annexed hereto as
Exhibit A. The Escrow Agent shall hold and disburse the Escrow
Shares as set forth herein provided that the Escrow Agent shall hold and enter
into transactions for the sale of the Shares solely for the benefit of Xxxxx and
not for its own account.
2.1 Effective Registration
Statement. In the event that Fushi obtains an effective
Registration Statement for the Escrow Shares, then, upon the written
notice of effectiveness of the Registration Statement from Fushi to the Escrow Agent, the Escrow Agent
will deposit Escrow Shares into the a brokerage account at Xxxxxx Xxxxx & Co., Inc., (“Brokerage
Account”) and will thereafter sell shares in such amounts and at such times as
Xxxxx directs; upon each sale, the cash proceeds shall be forwarded to Xxxxx,
with notice to Fushi, until such time as the Current Judgment Amount including
any accrued interest, has been paid in full. Notwithstanding the
foregoing, in 2009 Xxxxx is only entitled to receive from the Escrow Agent no
more than $3,000,000 of cash proceeds from sale of Escrow Shares, provided that Xxxxx shall use
its reasonable efforts to direct sale of the Escrow Shares resulting in full
payment of the Current Judgment Amount including any accrued interest by January
15, 2010 and provided further that any cash proceeds received from the sale in
2009 of Escrow Shares in excess of $3,000,000 shall be available for the general
creditors of Fushi upon any bankruptcy or liquidation of Fushi. Any
proceeds from sale of the Escrow Shares in 2009 in the amount which is more than
$3,000,000 and less than the then Current Judgment Amount including any accrued
interest shall be forwarded to Xxxxx by the Escrow Agent not earlier than and
within reasonable time of January 1, 2010. Fushi shall provide
written notice to the Escrow Agent that the Registration Statement has been
declared effective. Fushi will also provide written notice to the
Escrow Agent, if the Registration Statement is no longer effective immediately
after Fushi is advised that the
Registration Statement is no longer effective or thereafter ceases to be
effective.
2.2 Failure to Have an Effective
Registration Statement. In the event that (i) the Fushi’s
Registration Statement is not declared effective on or before 120 days from the date of this Agreement
(the “Registration Deadline”) or
thereafter ceases to be effective and (ii) for so long as the Registration
Statement is not effective subsequent to the Registration Deadline, then upon
such events, Xxxxx shall be entitled to receive Escrow Shares from the Escrow
Agent (the “Restricted Shares”) in such amounts, and at such times, as it
determines until the Judgment is satisfied, including any accrued interest on
the Current Judgment Amount pursuant to Section 4(g) of the Agreement or costs
relating to enforcing an Event of Default pursuant to Section 9 of the
Agreement. The Current Judgment Amount shall thereupon be reduced by
the Restricted Share Value (as defined in the Agreement). For
purposes of this Section 2.2, the Escrow Agent may deliver Escrow Shares
directly to Xxxxx immediately after the Registration Deadline unless Fushi
delivers written notice to the Escrow Agent that the Registration Statement has
been declared effective on or before the Registration Deadline pursuant to
Section 2.1 above.
3. Dividends and Other
Distributions in Respect of the Escrow Shares. All dividends
payable in stock or other non-cash property (“Non-Cash Dividends”) shall be
delivered to the Escrow Agent to hold in accordance with the terms
hereof. As used herein, the term “Escrow Shares” shall be deemed to
include the Non-Cash Dividends distributed thereon, if any.
4. Dividends on Dissolution or
Liquidation. In the event of dissolution of Fushi, or the
partial or complete liquidation of all or substantially all of its assets, or in
the event of bankruptcy or insolvency, the Escrow Shares shall participate in,
on a pro rata basis, with all other shares in any distribution
dividend. This Section 4 shall apply equally in the event of a merger
or consolidation, or sale of assets. The amount per share shall be
adjusted in the event of a stock split or reclassification of
shares.
5. Voting Rights as
Stockholders. The Escrow Shares shall be considered issued and
outstanding shares of Fushi. Simultaneously with the execution of
this Agreement, Xxxxx shall execute and deliver an irrevocable proxy authorizing
Xx. Xx Fu, or any person designated as his substitute, to vote the shares during
the time the Shares are held in escrow.
6. Transfer. Fushi
and Xxxxx agree that during the Escrow Period the Escrow Shares shall not be
sold, exchanged, assigned, gifted, encumbered, pledged, mortgaged, set over,
hypothecated, transferred or otherwise disposed of, whether voluntarily or
involuntarily, or by operation of law, except in accordance with the provisions
of this Agreement.
7. Concerning the Escrow
Agent.
7.1. Good Faith
Reliance. The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith and in the exercise of its own best
judgment, and may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel (including
counsel chosen by the Escrow Agent or counsel of
Fushi), statement, instrument, report or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained) that is believed by the Escrow Agent to be genuine and to be
signed or presented by the proper person or persons. The Escrow Agent
shall not be bound by any notice or demand, or any waiver, modification,
termination or rescission of this Agreement unless evidenced by a writing
delivered to the Escrow Agent signed by the proper party or parties and, if the
duties or rights of the Escrow Agent are affected, unless it shall have given
its prior written consent thereto.
7.2. Indemnification. The
Escrow Agent shall be indemnified and held harmless by Fushi from and against
any expenses, including (i) in connection with any
counsel fees incurred pursuant to Section 7.1 above and (ii) counsel fees
and disbursements, or loss suffered by the Escrow Agent in connection with any
action, suit or other proceeding involving any claim that in any way, directly
or indirectly, arises out of or relates to this Agreement, the services of the
Escrow Agent hereunder, or the Escrow Shares held by it hereunder, other than
expenses or losses arising from the gross negligence or willful misconduct of
the Escrow Agent. Promptly after the receipt by the Escrow Agent of
notice of any demand or claim or the commencement of any action, suit or
proceeding, the Escrow Agent shall notify the other parties hereto in
writing. In the event of the receipt of such notice, the Escrow
Agent, in its sole discretion and without
liability, may commence an action in the nature of interpleader in an
appropriate court without liability to
determine ownership or disposition of the Escrow Shares or it may deposit the
Escrow Shares with the clerk of any appropriate court without liability or it may retain the Escrow
Shares without liability pending receipt of
a final, non appealable order of a court having jurisdiction over all of the
parties hereto directing to whom and under what circumstances the Escrow Shares
are to be disbursed and delivered. The provisions of this Section 7.2 shall
survive in the event the Escrow Agent resigns or is discharged pursuant to Sections 7.5 or 7.6
below.
7.3. Compensation. The
Escrow Agent shall be entitled to reasonable compensation of $2,500 one-time fee
plus $750 for each brokerage transaction for all services rendered by it
hereunder. The Escrow Agent shall also be entitled to reimbursement from
Fushi for all expenses paid or incurred by it in the administration of its
duties hereunder including, but not limited to, all counsel, brokerage fees,
advisors’ and agents’ fees and disbursements and all taxes or other governmental
charges, except that any taxes incurred as a result of transactions for the sale
of the Escrow Shares on behalf of Xxxxx shall not be borne or reimbursed by
Fushi.
7.4. Further
Assurances. From time to time on and after the date hereof,
Fushi and Xxxxx shall deliver or cause to be delivered to the Escrow Agent such
further documents and instruments and shall do or cause to be done such further
acts as the Escrow Agent shall reasonably request to carry out more effectively
the provisions and purposes of this Agreement, to evidence compliance herewith
or to assure itself that it is protected in acting hereunder.
7.5. Resignation. The
Escrow Agent may resign at any time and be discharged from its duties as escrow
agent hereunder by its giving the other parties hereto written notice and such
resignation shall become effective as hereinafter provided. Such
resignation shall become effective at such time that the Escrow Agent shall turn
over to a successor escrow agent appointed by Fushi and Xxxxx, the Escrow Shares
held hereunder. If no new escrow agent is so appointed within the 60
day period following the giving of such notice of resignation, the Escrow Agent
may deposit the Escrow Shares with any court it reasonably deems appropriate
without any liability to the Escrow
Agent.
7.6. Discharge of Escrow
Agent. The Escrow Agent shall resign and be discharged from
its duties as escrow agent hereunder if so requested in writing at any time by
the other parties hereto, jointly, provided, however, that such resignation
shall become effective only upon acceptance of appointment by a successor escrow
agent as provided in Section
7.5.
7.7. Liability. Notwithstanding
anything herein to the contrary, the Escrow Agent shall not be relieved from
liability hereunder for its own gross negligence or its own willful
misconduct.
8. Miscellaneous.
8.1. Governing
Law. This Agreement shall be governed by, interpreted and
construed in accordance with and under the laws of the State of New York without
regard to principles of conflicts of law. Any disagreement, claim or
controversy among the Parties or any of them arising out of or in connection
with this Agreement shall be determined exclusively before the Xxxxxxxxx Xxxxx
Xxxxxx in the United States District Court, District of
Connecticut. If that Court declines or lacks jurisdiction, then any
disagreement, claim or controversy among the Parties or any of them arising out
of or in connection with this Agreement shall be determined exclusively before
the Supreme Court of New York, New York County, or the United States District
Court for the Southern District of New York. The Parties consent to
service of process by overnight courier to the above addresses. The
Parties hereby consent to personal jurisdiction and venue in both New York and
Connecticut. The prevailing Party or Parties shall be entitled to
recover from the losing Party or Parties their reasonable attorney’s fees and
costs incurred in any lawsuit or other action brought to enforce any right
arising out of this Agreement.
8.2. WAIVER OF JURY
TRIAL. ANY ACTION, DEMAND, CLAIM OR COUNTERCLAIM ARISING UNDER
OR RELATING TO THIS AGREEMENT WILL BE RESOLVED BY A JUDGE ALONE AND EACH OF THE
PARTIES WAIVES ANY RIGHT TO A JURY TRIAL THEREOF.
8.3. Construction; Drafting; No
Prejudice. Should any provision of this Agreement require
judicial interpretation, it is agreed that the Court, in interpreting or
considering such provision, shall not apply any presumption that the terms
hereof shall be more strictly construed against the Party who itself or through
its agent prepared the same, it being agreed that all Parties hereto have
participated in the drafting of this Agreement and that legal counsel was
consulted by each Party in connection with the drafting, finalization and
execution of this Agreement.
8.4. Severability. If
any provision or term of this Agreement is held to be illegal, invalid, or
unenforceable, such provision or term shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision or term there shall be added
automatically as a part of this Agreement another provision or term as similar
to the illegal, invalid, or unenforceable provision as may be possible and that
is legal, valid, and enforceable.
8.5. Entire
Agreement. This Agreement and the Settlement Agreement
contains the entire agreement of the parties hereto with respect to the subject
matter hereof and, except as expressly provided herein, may not be changed or
modified except by an instrument in writing signed by each party
hereto. It may be executed in several original or facsimile
counterparts, each one of which shall constitute an original, and together shall
constitute but one instrument.
8.6. Headings. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation thereof.
8.7. Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their legal representatives,
successors and assigns.
8.8. Notices. Any
notice or other communication required or that may be given hereunder shall be
in writing and either be delivered personally or be mailed, certified or
registered mail, or by private national courier service, return receipt
requested, postage prepaid, and shall be deemed given when so delivered
personally or, if mailed, two days after the date of mailing, as
follows:
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To
Xxxxx:
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Xxxxx
Brothers, Inc.
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Farmhouse
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000
Xxxx Xxxx Xxxx
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Xxxx
Xxxx, Xxxxxxxxxxx 00000
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Attn:
Xxxx Xxxxxxx
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with
a copy to:
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Xxxxxx
X. Xxxxxxx, Esq.
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Xxxxxx
Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx
LLP
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Park
Avenue Tower
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00
Xxxx 00xx Xxxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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To
Fushi:
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Fushi
International, Inc.
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0
Xxxxxx Xxxxx Xxxx, Xxx Xxxx
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Xxxxxx
Xxxxx 000000
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Attn:
Xxxxx Xxxx
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with
a copy to:
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Xxxxxx
Xxxxxx, Esq.
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Guzov
Ofsink LLC
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000
Xxxxxxx Xxxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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To
the Escrow Agent:
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Continental
Stock Transfer & Trust
Company
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00
Xxxxxxx Xxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attn:
Chairman
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The
parties may change the persons and addresses that the notices or other
communications are to be sent by giving written notice to any such change in the
manner provided herein for giving notice.
[SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the Parties have each duly executed this Agreement as of the
date first above written.
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XXXXX
BROTHERS, INC.
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By:
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/s/ Xxxx X. Xxxxx | |
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XXXXX
BROS. & CO., INC.
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By:
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/s/ Xxxx X. Xxxxx | |
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XXXXX
BROTHERS SECURITIES CORP.
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By:
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/s/ Xxxx X. Xxxxx | |
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FUSHI
INTERNATIONAL, INC.
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By:
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/s/ Xxxxx Xxxx | |
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DALIAN
FUSHI BIMETALLIC MANUFACTURING COMPANY LTD.
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By:
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/s/ Xxxxx Xxxx | |
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CONTINENTAL
STOCK TRANSFER & TRUST COMPANY
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By:
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/s/ Xxxxxxxxx Xxxxxxxx | |
