LOCK BOX AGREEMENT
LOCK
BOX
AGREEMENT, dated as of 1st
day of
September, 2005 (this "Agreement"),
among
General Steel Holdings Inc., a Nevada corporation (the "Company"),
each
of the shareholders of the Company listed on the signature pages to this
Agreement (each, a “Shareholder”
and,
collectively, the “Shareholders”),
and
____________, a _________, as lock box agent (the "Lock
Box Agent").
W
I T N E S E T H:
WHEREAS,
the Company and each of the Shareholders have entered into a Subscription
Agreement dated as of September 1st, 2005 (each, a "Subscription
Agreement";
capitalized terms not defined herein have the meanings ascribed to them in
the
Subscription Agreements) pursuant to which the Shareholders purchased from
the
Company, and the Company sold the Shareholders, Common Shares of the Company,
upon the terms and subject to the conditions set forth in the Subscription
Agreements;
WHEREAS,
it is contemplated under the Subscription Agreements that the Company will
deposit or cause to be deposited into an account an
appropriate amount to complete the Repurchase from any amounts it receives
from
assuming any debt obligations or the issuance
and/or
sale of debt or debt securities after the Closing (each such amount, the
“Sale
Proceeds”
and,
collectively, the “Escrow
Amount”)
to be
held and disbursed by the Lock Box Agent in accordance with Section 5 of this
Agreement; and
WHEREAS,
a copy of the Subscription Agreements has been delivered to the Lock Box Agent,
and the Lock Box Agent is willing to act as the Lock Box Agent hereunder;
NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements contained
herein and in the Subscription Agreements, and intending to be legally bound
hereby, the parties hereby agree as follows:
SECTION
1. Appointment
and Agreement of Lock Box Agent.
The
Company and the Shareholders hereby appoint the Lock Box Agent to serve as,
and
the Lock Box Agent hereby agrees to act as, lock box agent upon the terms and
conditions of this Agreement.
SECTION
2. Establishment
of the Escrow Fund.
(a)
Pursuant to Section 6.1(b) of each Subscription Agreement, each time the Company
shall receive Sale Proceeds, it shall deliver to the Lock Box Agent by wire
transfer in immediately available funds such Sale Proceeds on the first business
day after it receives such funds. The Lock Box Agent shall hold each of the
Sale
Proceeds and all interest or other amounts earned thereon (the "Escrow
Fund")
in
escrow pursuant to this Agreement.
(b)
The
Company confirms to the Lock Box Agent and to the Shareholders that the Escrow
Fund is free and clear of all encumbrances except as may be created by this
Agreement and the Subscription Agreements.
SECTION
3. Purpose
of the Escrow Fund.
The
Escrow Amount will be held by the Lock Box Agent to fund the obligations of
the
Company to make payments to each Shareholder with respect to the Company’s
repurchase of such Shareholder’s Shares pursuant to Section 6.1 of each
respective Subscription Agreement.
SECTION
4. Shareholders’
Percentage Interest in Escrow Fund.
Attached hereto as Schedule
A
is a
schedule listing each Shareholder and such Shareholder’s initial interest in the
Escrow Fund (expressed as a percentage, based on the number of Shares of the
Company held by such Shareholder immediately after Closing (each a “Shareholder
Percentage”)).
Schedule
A
may be
amended by the Lock Box Agent upon receipt of a joint written instruction from
the Company and the Shareholders.
SECTION
5. Payments
from the Escrow Fund.
The Lock
Box Agent shall release the Escrow Amount as follows:
(a)
Upon
and
only upon receipt of a joint written instruction from the Company and the
Shareholders, the Lock Box Agent shall release to the Company and Shareholders,
as applicable, by wire transfer of immediately available funds, the amounts
specified therein to be disbursed to such parties; or
(b) At
least
fifteen (15) days prior to, but not more than twenty (20) days prior to, the
Repurchase Date, the Company shall deliver to the Shareholders a certificate
executed by its Chief Financial Officer describing (i) all issuances of Common
Shares purchased by investors pursuant to the Offering, (ii) all amounts
it received from the assumption any debt obligations or the issuance
and/or
sale of debt or debt securities after the Closing and (iii) any stock splits,
dividends, subdivisions, combinations, reclassifications or other similar
transaction in accordance with Section 6.1 of the Subscription Agreement on
or
prior to the Repurchase Date. At least ten (10) days prior to the Repurchase
Date, [Shareholder’s Name], a Shareholder (“XXX”),
will
prepare, or cause to be prepared, and deliver to the Company a calculation
of
the Total Shareholder Distribution Proceeds (defined below) and the Company
will
deliver such calculation to each Shareholder. The Total Shareholder Distribution
Proceeds shall be calculated by multiplying (i) the total number of Common
Shares sold by the Company in connection with the Offering by (ii) the
Repurchase Price. XXX’s calculation of the Total Shareholder Distribution
Proceeds shall be final, conclusive and binding. On the day prior to the
Repurchase Date, XXX shall notify the Lock Box Agent in writing of the Total
Shareholder Distribution Proceeds. If the Lock Box Agent receives notice from
a
Shareholder that such Shareholder wishes to have its Shares repurchased, on
the
Repurchase Date, the Lock Box Agent shall release to such Shareholder, by wire
transfer in immediately available funds to the account designated in
Exhibit
D
to each
Subscription Agreement or such other account as the Shareholder has designated,
in accordance with each Shareholder’s Shareholder Percentage, an amount equal to
the product of (i) the Total Shareholder Distribution Proceeds multiplied by
(ii) such Shareholder’s Shareholder Percentage. Within five (5) business days
following payment to the Shareholders pursuant to the preceding sentence, the
Lock Box Agent shall release to the Company, by wire transfer of immediately
available funds, all funds then remaining in the Escrow Account (minus all
applicable fees, costs and expenses).
SECTION
6. Liquidation
of the Escrow Fund.
Whenever the Lock Box Agent shall be required to make payment from the Escrow
Fund, the Lock Box Agent shall pay such amounts by liquidating the investments
of the Escrow Fund to the extent necessary to pay such amounts in full and
in
cash.
SECTION
7. Maintenance
of the Escrow Fund; Termination of the Escrow Fund.
The
Lock Box Agent shall continue to maintain the Escrow Fund until the termination
of this Agreement. Notwithstanding any other provision of this Agreement to
the
contrary, at any time prior to the termination of the Escrow Fund, the Lock
Box
Agent shall, if so instructed in a joint writing signed by the Company and
the
Shareholders, pay from the Escrow Fund to the Company or the Shareholders,
as
directed in such writing, the amount of cash so instructed (and if such cash
is
not available, shall liquidate such investments of the relevant Escrow Fund
as
are necessary to make such payment).
SECTION
8. Investment
of Escrow Fund.
(a) The Lock Box Agent shall invest and reinvest moneys on deposit in the
Escrow Fund, unless joint written notice to the contrary is received from the
Company and the Shareholders, in any combination of the following: (i) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or readily marketable obligations
unconditionally guaranteed by the full faith and credit of the Government of
the
United States, (ii) insured certificates of deposit of, or time deposits with,
any commercial bank that is a member of the Federal Reserve System and which
issues (or the parent of which issues) commercial paper rated as described
in
clause (iii), is organized under the laws of the United States or any State
thereof and has combined capital and surplus of at least $1 billion, or (iii)
commercial paper in an aggregate amount of no more than $1,000,000 per issuer
outstanding at any time, issued by any corporation organized under the laws
of
any State of the United States, rated at least “Prime-1” (or the then equivalent
grade) by Xxxxx’x Investors Services, Inc. or “A-1” (or the then equivalent
grade) by Standard & Poors, Inc.
(b)
The
Lock
Box Agent shall have the power to sell or liquidate the foregoing investments
whenever the Lock Box Agent shall be required to distribute the Escrow Fund
pursuant to the terms of this Agreement or as otherwise contemplated in this
Agreement. The Lock Box Agent shall have no responsibility or liability for
any
diminution of the funds held in the Escrow Fund which may result from any
investment made pursuant to this Escrow Agreement, including any losses on
any
investment required to be liquidated prior to maturity in order to make a
payment or distribution required hereunder.
SECTION
9. Assignment
of Rights to the Escrow Fund; Assignment of Obligations;
Successors.
This
Agreement may not be assigned by operation of Law or otherwise without the
express written consent of the other parties hereto (which consent may be
granted or withheld in the sole discretion of such other parties). This
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns.
SECTION
10. Lock
Box Agent.
(a) Except as expressly contemplated by this Agreement or by joint written
instructions from the Company and the Shareholders, the Lock Box Agent shall
not
sell, transfer or otherwise dispose of in any manner all or any portion of
the
Escrow Fund, except pursuant to an order of a court of competent
jurisdiction.
(b) The
duties and obligations of the Lock Box Agent shall be determined solely by
this
Agreement, and the Lock Box Agent shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
Agreement.
(c) In
the
performance of its duties hereunder, the Lock Box Agent shall be entitled to
rely upon any document, instrument or signature believed by it in good faith
to
be genuine and signed by any party hereto or an authorized officer or agent
thereof, and shall not be required to investigate the truth or accuracy of
any
statement contained in any such document or instrument. The Lock Box Agent
may
assume that any person purporting to give any notice in accordance with the
provisions of this Agreement has been duly authorized to do so.
(d) The
Lock
Box Agent shall not be liable for any error of judgment, or any action taken,
suffered or omitted to be taken, hereunder except in the case of its gross
negligence, bad faith or willful misconduct. The Lock Box Agent may consult
with
counsel of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and
in
accordance with the opinion of such counsel.
(e) The
Lock
Box Agent shall have no duty as to the collection or protection of the Escrow
Fund or income thereon, nor as to the preservation of any rights pertaining
thereto, beyond the safe custody of any such funds actually in its
possession.
(f) As
compensation for its services to be rendered under this Agreement, for each
year
or any portion thereof, the Lock Box Agent shall receive a fee in the amount
specified in Schedule
B
to this
Agreement. Except to the extent related to a breach of its obligations under
this Agreement or its own negligence or willful misconduct, the Lock Box Agent
shall be reimbursed upon request for all expenses, disbursements and advances,
including reasonable fees of outside counsel, if any, incurred or made by it
in
connection with the preparation of this Agreement and the carrying out of its
duties under this Agreement. All such fees and reimbursed expenses shall be
borne by the Company.
(g) The
Lock
Box Agent (and any successor lock box agent) may at any time resign as such
by
delivering the Escrow Fund to any successor lock box agent mutually designated
by the Company and the Shareholders in writing, or to any court of competent
jurisdiction, whereupon the Lock Box Agent shall be discharged of and from
any
and all further obligations arising in connection with this
Agreement.
SECTION
11. Termination.
This
Escrow Agreement shall terminate on the date on which there are no funds
remaining in the Escrow Fund.
SECTION
12. Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by courier service, by cable,
by telecopy, by telegram, by telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 12):
(a) if
to the
Company:
________________________
________________________
Facsimile:
________________
Attention:
________________
with
a
copy to:
________________________
________________________
________________________
Facsimile:
________________
Attention:
________________
(b) if
to the
Shareholders:
________________________
________________________
________________________
Facsimile:
________________
Attention:
________________
with
a
copy to:
________________________
________________________
________________________
Facsimile:
________________
Attention:
________________
(c) if
to the
Lock Box Agent, to:
________________________
________________________
________________________
Facsimile:
________________
Attention:
________________
SECTION
13. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York applicable to contracts executed and to be performed
entirely within that State.
SECTION
14. Amendments.
This
Agreement may not be amended or modified except by an instrument in writing
signed by, or on behalf of, the Company, the Shareholders and the Lock Box
Agent.
SECTION
15. Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic and legal substance of the transactions contemplated
by
this Agreement is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal
or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
SECTION
16. Entire
Agreement.
This
Agreement and the Subscription Agreements constitute the entire agreement of
the
parties hereto with respect to the subject matter hereof and supersede all
prior
agreements and undertakings, both written and oral, among the Company, the
Shareholders and the Lock Box Agent with respect to the subject matter
hereof.
SECTION
17. No
Third Party Beneficiaries.
This
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other person or entity any legal or equitable right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION
18. Headings.
The
descriptive headings contained in this Agreement are included for convenience
of
reference only and shall not affect in any way the meaning or interpretation
of
this Agreement.
SECTION
19. Counterparts.
This
Agreement may be executed in one or more counterparts, and by different parties
hereto in separate counterparts, each of which when executed shall be deemed
to
be an original but all of which when taken together shall constitute one and
the
same agreement.
[Remainder
of page left blank intentionally]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first written above by their respective officers thereunto duly
authorized.
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By
________________________________
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Name:
Title:
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SHAREHOLDERS:
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By
________________________________
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Name:
Title:
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By
________________________________
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Name:
Title:
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By
________________________________
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Name:
Title:
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[LOCK
BOX AGENT]:
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By
________________________________
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Name:
Title:
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SCHEDULE
A
[Shareholder
Percentages]
SCHEDULE
B
[Lock
Box
Agent Fees]
