Unassociated Document


    Exhibit
10.1

     

    SETTLEMENT
AND FORBEARANCE AGREEMENT AND RELEASE

     

    This
Settlement 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”), and Kuhns
Brothers, Inc., Kuhns Brothers Securities Corp., and Kuhns Bros. & Co. Inc.
(collectively and separately “Kuhns”).  Fushi and Kuhns are sometimes
referred to herein, individually, as a “Party,” and, collectively, as the
“Parties.”

     

    WHEREAS,
Kuhns commenced an action against Fushi on November 27, 2006 in the United
States District Court for the District of Connecticut, captioned Kuhns Brothers, Inc. et al. v. Fushi
International, Inc. et al., Case No. 3:06 Civ. 1917
(PCD) (the “Action”);

     

    WHEREAS,
the Court entered judgment in the Action in favor of Kuhns on or about
August 8, 2008 and the judgment has thereafter been registered in other
districts (collectively, the “Judgment”) and Fushi has appealed
therefrom;

     

    WHEREAS,
the Parties have engaged in settlement negotiations and have now reached an
agreement, fully and finally compromising, settling, and resolving the disputes
between the Parties;

     

    WHEREAS,
the Parties each have received the advice of counsel in the preparation,
drafting, and execution of this Agreement, which was negotiated at arm’s
length.

     

    NOW,
THEREFORE, in consideration of the mutual promises and representations herein
contained, the undertakings herein set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

     

    1.           Effective
Date.  This Agreement will be effective on the Execution
Date.

     

    2.           Initial
Deliveries.

     

    (a)           Within
four business days after the Execution Date, Fushi shall issue a Current Report
on Form 8-K disclosing the material terms of this transaction.

     

    (b)           This
Agreement constitutes “Instructions” by both Fushi and Kuhns to the Escrow Agent
to deliver within 48 hours after the Execution Date, the cash component of the
Escrow Assets (as those terms are defined in the Escrow Agreement between Kuhns
and Fushi dated October 3, 2007 (the “2007 Escrow agreement”)), comprising
$1 million plus accrued interest (the “Escrow Payment”), by wire to Olshan
Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street,
New York, New York 10022.

     

    3.           The Closing. The Closing shall occur
at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park
Avenue Tower, 65 East 55th Street,
New York, New York 10022, at 2:00 p.m. on the twelfth Trading Day after the
Execution Date, time being of the essence.  The Parties agree to
deliver the following at the Closing:

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (a)           This
Agreement constitutes “Instructions” by both Fushi and Kuhns to the Escrow Agent
under the 2007 Escrow Agreement to deliver the stock component of the Escrow
Assets comprised of 100,000 shares of Fushi Common Stock and a stock power to
Fushi.

     

    (b)           Fushi
shall deliver to Kuhns 100,000 shares of Fushi Common Stock (the “Initial
Shares”).  The Shares shall be issued in the name of “Kuhns Brothers,
Inc.”  The shares shall bear customary restrictive
legends.

     

    (c)           The
foregoing consideration, along with the Initial Deliveries in paragraph 2, is
referred to herein as the Initial Settlement Payment.

     

    (d)           Fushi
shall deliver a notice of discontinuance of its appeal in the Action, without
costs to either party.

     

    (e)           Fushi
shall deposit a certificate for 2,200,000 shares of Fushi Common Stock in escrow
(the “Escrow Shares”) with Continental Stock Transfer as Escrow Agent (the
“Escrow Agent”) along with an executed stock power in blank, all to be held
pursuant to the Escrow Agreement annexed as Exhibit A (the “Escrow Agreement”).  Fushi,
Kuhns and the Escrow Agent shall all execute the Escrow Agreement.

     

    (f)        
   Fushi shall issue to its transfer agent and the Escrow Agent,
the Irrevocable Transfer Agent Instructions annexed hereto as Exhibit B.

     

    (g)           At
the Closing the Judgment shall be reduced to seven million ($7,000,000) and then
further reduced by (i) the amount of the Escrow Payment; and (ii) the
Initial Share Value (as described below).  The Judgment shall
thereafter be reduced by (i) the amounts received by Kuhns from sales of the
Escrow Shares, or their delivery to Kuhns as Restricted Shares (as defined
below) in accordance with Section 4(g); (ii) any reduction arising from a change
to the Initial Share Value upon Fushi obtaining timely registration for the
Initial Shares; and/or (iii) any other payments made to Kuhns by
Fushi.  The amount due under the Judgment is referred to here as
“Current Judgment Amount.”  Kuhns shall continue to have all rights as
a Judgment creditor, subject to its forbearance obligations in paragraph 9,
until the Judgment is satisfied.

     

    4.           Registration
Statement.

     

    (a)           Mandatory
Registration.  On or prior to the
thirtieth day after the Closing the Company shall file a registration
statement (the “Registration Statement”) with the U.S. Securities and Exchange
Commission (“SEC”) under the Securities Act of 1933, as amended (the “Securities
Act”) for the registration of the Initial Shares
and Escrow Shares so that they may be sold in the public markets in
accordance with the Escrow Agreement.  The Company shall cause the
Registration Statement to become effective and remain in effect as provided
herein.  The Company shall use its best efforts to have the
Registration Statement be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event no later than
120 days from Closing (the “Registration Deadline”).  The Company
acknowledges that with respect to its obligation to have the Registration
Statement declared effective by the Registration Deadline, time is of the
essence. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the Initial
Shares and Escrow Shares that Kuhns shall furnish to the Company completed
Selling Securityholder Questionnaire in a form reasonably acceptable to
Fushi.

     

    
      
         


      

      
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    (b)           Registration Statement
Form.  The Registration Statement shall be on Form S-3 and
shall be approved by Kuhns, which approval shall not be unreasonably
withheld.  No later than five (5) days prior to the filing date, Fushi
shall provide drafts of the Registration Statement proposed to be filed by it to
Kuhns in advance of the filing thereof and provide Kuhns with a reasonable
amount of time to review and comment on the same prior to its
filing.

     

    (c)           Effective Registration
Statement.  The registration required pursuant to this Section
4 shall not be deemed to have been effected unless the Registration Statement
has been declared effective by the SEC and has remained effective in compliance
with the provisions of the Securities Act with respect to the disposition of all
of Escrow Shares covered by such Registration Statement necessary to pay the
Current Judgment Amount.

     

    (d)           Expenses;
Taxes.  All expenses (including reasonable counsel fees of
Kuhns ) incurred in connection with registrations, filings or qualifications of
Escrow Shares pursuant to this Section 4, including (without limitation) all
registration, filing, and qualification fees, printers’ and accounting fees,
fees and disbursements of counsel for Fushi, shall be borne by
Fushi.

     

    (e)           Registration
Procedures.  Fushi shall, as expeditiously as
possible:

     

    (i)        
   prepare and file with the Commission the Registration
Statement with respect to the Initial Shares
and Escrow Shares, respond as promptly as possible to any comments
received from the Commission, and use its best efforts to cause the Registration
Statement to become and remain effective for the Effectiveness Period with
respect thereto, and promptly provide to Kuhns copies of all filings and
Commission letters of comment relating thereto;

     

    (ii)           prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all the Shares covered by
such Registration Statement such time as the Current Judgment Amount has been
satisfied;

     

    (iii)          furnish
such number of conformed copies of such Registration Statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such Registration Statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as Kuhns may
reasonably require;

     

    
      
         


      

      
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    (iv)          use
its best efforts to (A) register or qualify the
Initial Shares and Escrow Shares under such other securities or blue sky
laws of such states and jurisdictions where an exemption is not available and as
Kuhns shall reasonably request, (B) keep such registration or qualification in
effect for so long as such Registration Statement remains in effect, and (C)
take any other action which may be reasonably necessary or advisable to enable
Kuhns to consummate the disposition in such jurisdictions of the securities to
be sold by Kuhns, except that Fushi shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (v) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;

     

    (v)           immediately
notify Kuhns at any time when a prospectus relating thereto is required to be
delivered or available under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of Kuhns promptly
prepare and furnish to it a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made;

     

    (vi)          otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC;

     

    (vii)         provide
and cause to be maintained a transfer agent and registrar for all the Escrow
Shares covered by such Registration Statement from and after a date not later
than the effective date of such registration;

     

    (viii)       
its best effort to avoid the issuance of, or if issued, to obtain the withdrawal
of, any order enjoining or suspending the use or effectiveness of such
Registration Statement or suspending the qualification (or exemption from
qualification) of any of the Shares for sale in any jurisdiction, as promptly as
reasonably practicable; and

     

    (ix)           list
the Initial Shares and Escrow Shares on the
NASDAQ Global Select Market or any other national securities exchange on which
the shares of the same class covered by such Registration Statement are then
listed or for which the Escrow Shares and Fushi qualify, and, if no such shares
are so listed, on any national securities exchange on which the Common Stock is
then listed.

     

    
      
        
        

      

      
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    (f)       
    Indemnification.


    (i)         
  Indemnification by Fushi.  With regard to any Registration
Statement, Fushi will, and hereby do, jointly and severally, indemnify and hold
harmless Kuhns and its respective directors, officers, partners, agents and
affiliates, against any losses, damages or claims, including reasonable
attorneys’ fees (“Losses”), joint or several, to which Kuhns or any such
director, officer, partner, agent, affiliate or controlling person may become
subject under the Securities Act or otherwise, including, without limitation,
the fees and expenses of legal counsel, insofar as such any Losses arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and Fushi will reimburse Kuhns and each such director, officer,
partner, agent, affiliate and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such any Losses; provided, however, that the Company shall not be
liable in any such case to the extent that any such Losses arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to Fushi by
or on behalf of Kuhns, specifically stating that it is for use in the
preparation thereof.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Investor or
any such director, officer, partner, agent, affiliate or controlling person and
shall survive the transfer of such securities by Kuhns.

     

    (ii)           Indemnification
Payments.  The indemnification and contribution required by this
Section 4(f) shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Losses
are incurred.

     

    (iii)          Promptly
after receipt by a party entitled to claim indemnification hereunder (an
"Indemnified Party") of notice of the commencement of any action, such
Indemnified Party shall, if a claim for indemnification in respect thereof is to
be made against a party hereto obligated to indemnify such Indemnified Party (an
"Indemnifying Party"), notify the Indemnifying Party in writing thereof, but the
omission so to notify the Indemnifying Party shall not relieve it from any
liability which it may have to such Indemnified Party other than under this
Section 4(f)(iii) and shall only relieve it from any liability which it may have
to such Indemnified Party under this Section 4(f)(iii) if and to the extent the
Indemnifying Party is prejudiced by such omission. In case any such action shall
be brought against any Indemnified Party and it shall notify the Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such Indemnified Party, and, after
notice from the Indemnifying Party to such Indemnified Party of its election so
to assume and undertake the defense thereof, the Indemnifying Party shall not be
liable to such Indemnified Party under this Section 4(f)(iii) for any legal
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof; if the Indemnified Party retains its own counsel, then the
Indemnified Party shall pay all fees, costs and expenses of such counsel,
provided, however, that, if the defendants in any such action include both the
indemnified party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the Indemnifying
Party or if the interests of the Indemnified Party reasonably may be deemed to
conflict with the interests of the Indemnifying Party, the Indemnified Party
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the Indemnifying Party as
incurred.

     

    
      
         


      

      
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    (iv)          In
order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i)Kuhns, or any
officer, director or controlling person of Kuhns, makes a claim for
indemnification pursuant to this Section 5 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 4 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of Kuhns or
such officer, director or controlling person of Kuhns in circumstances for which
indemnification is provided under this Section 4; then, and in each such case,
the Company and the Kuhns will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that Kuhns will not be required to contribute any
amount in excess of the proceeds received by Kuhns pursuant to the shares it
sold in connection with the Registration Statement; and no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.

     

    (g)           In
the event that (i) the Company’s Registration Statement is not declared
effective by the Registration Deadline and (ii) for so long as the
Registration Statement is not effective subsequent to the Registration Deadline,
the Current Judgment Amount shall accrue interest at the rate of eighteen
percent per annum.  In addition, upon such events, Kuhns 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.  The Current Judgment Amount shall thereupon be reduced
by the Restricted Share Value (as defined below).

     

    5.           The Current Judgment
Amount.  Subject to the terms and conditions set forth in this
Agreement and the Escrow Agreement, including the forbearance by Kuhns, Fushi
shall pay to Kuhns no later than January 15, 2010, the balance due under the
Judgment, computed as follows:

     

    (a)           Initial Share
Value.  The Judgment shall be reduced the Initial Share Value,
which shall mean an amount equal to forty percent (40%) of the VWAP for Fushi
common stock for the ten trading days before the date of the Closing multiplied
by 100,000, provided, however, if
Fushi obtains an effective registration statement for the Initial Shares by the
Registration Deadline and that registration statement remains effective through
the earlier of:  (i) the sale of the Initial Shares or
(ii) December 31, 2009, the Judgment shall instead be reduced by an amount
equal to ninety percent (90%) of the VWAP for Fushi Common Stock for the ten
trading days before the effective date of the Registration
Statement.

     

    
      
         


      

      
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    (b)           The Escrow
Shares:  In the event that Fushi meets the Registration
Deadline and for so long as the Registration Statement remains effective, the
Judgment shall be further reduced by an amount equal to the cash proceeds
distributed by the Escrow Agent to Kuhns in connection with sales of the Escrow
Shares.  Notwithstanding the
foregoing, in 2009 Kuhns 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 Kuhns 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 Kuhns by the Escrow Agent not earlier than and within reasonable time of
January 1, 2010.  Notwithstanding anything to the contrary in this
Agreement, the amount of Escrow Shares sold on any given day shall not exceed
60% of the daily trading volume in Fushi’s stock on the previous trading
day as reported on all national securities exchanges and/or automated
quotation system, provided however that this limitation does not apply to any
private sales of the Escrow Shares.  In the event that Fushi fails to
meet the Registration Deadline, but causes a Registration Statement to be
declared effective by October 31, 2009 (the “Second Registration Deadline”), the
Judgment shall instead be further reduced by an amount equal to 90% of the cash
proceeds distributed by the Escrow Agent to Kuhns in connection with sales of
the Escrow Shares.

     

    (c)           Restricted Share
Value.  In the event that Kuhns elects to receive Restricted
Shares under Section 4(g), the Current Judgment Amount shall be reduced by the
Restricted Share Value, which shall mean an amount equal to fifty percent (50%)
of the VWAP for Fushi common stock for the ten trading days before the date of
delivery of the Restricted Shares to Kuhns.

     

    (d)           Pre-Payment.  Fushi
may pay the balance of the Current Judgment Amount to Kuhns at any time, in its
sole discretion, by wire transfer to such accounts as Kuhns directs without any
pre-payment penalty.  If at any time prior to January 15, 2010, Fushi
(i) prior to any sales of Escrow Shares, prepays the entire outstanding balance
of the Current Judgment, or (ii) taking into account the cash proceeds received
by Kuhns for sales of Escrow Shares up to such time, pays the remaining balance
of the Current Judgment Amount to Kuhns, then any remaining Escrow Shares shall
be forthwith cancelled.

     

    (e)           Final
Payment.  All further payments to Kuhns in satisfaction of the
balance due under the Judgment, if any, shall be made on or before January
15, 2010 by wire
transfer to such account as Kuhns may direct.

     

    
      
         


      

      
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    (f)     
      Satisfaction.  Once
the Current Judgment Amount has been satisfied hereunder, Kuhns agrees to
instruct the Escrow Agent to return any remaining Escrow Shares to Fushi
pursuant to the terms of the Escrow Agreement.  Upon payment in full
of the Current Judgment Amount, Kuhns shall deliver to Fushi a satisfaction of
Judgment.

     

    6.           General Release from
Kuhns.  Effective upon the receipt of payment in full of the
balance due under the Current Judgment Amount, for good and valuable
consideration, the sufficiency of which is hereby acknowledged, Kuhns, its
parents, subsidiaries, affiliates, officers, and directors, past and present,
and successors in interest (for this section only, the “Releasors”) hereby
release and discharge Fushi, its parents, subsidiaries, affiliates, officers,
directors, past and present, and successors in interest (for this section only,
the “Releasees”) from all actions, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, claims and demands whatsoever, whether known or unknown, in
law or equity, of every kind and nature which against Releasees, Releasors ever
had, now have, or hereafter can, shall, or may have, for, upon, or by reason of
any matter, cause or thing whatsoever, from the beginning of the world to the
day of the date of this RELEASE, except for the obligations of Fushi under this
Agreement.

     

    7.           General Release from
Fushi.  For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Fushi, its parents, subsidiaries,
affiliates, officers, directors, past and present, and successors in interest
(for this section only, the “Releasors”) hereby release and discharge Kuhns, its
parents, subsidiaries, affiliates, officers, and directors, past and present,
and successors in interest (for this section only, the “Releasees”) from all
actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, whether known or unknown, in law or equity, of every
kind and nature which against Releasees, Releasors ever had, now have, or
hereafter can, shall, or may have, for, upon, or by reason of any matter, cause
or thing whatsoever, from the beginning of the world to the day of the date of
this RELEASE, except for the obligations of Kuhns under this
Agreement.

     

    8.           No
Admission.  Nothing in this Agreement is intended to or may be
construed in any manner as an admission by any of the Parties of any liability,
wrongdoing, violation of law, or unlawful conduct whatsoever.  Neither
this Agreement nor any of its provisions shall be offered or received in
evidence against any Party in any action or proceeding, except an action or
proceeding to enforce its terms.  The consideration offered herein is
the full, final and complete settlement of all claims asserted or that might
have been asserted by Kuhns against Fushi.

     

    9.           Proceedings in the
Action.  After the Effective Date, Kuhns shall forbear from
taking any action to enforce any balance due under the Judgment, until such time
as a Default shall occur.  A Default shall occur upon the earliest to
occur of any of the following:

     

    (i)       
    Fushi’s failure to deliver any portion of the Initial
Settlement Payment to Kuhns at the Closing;

     

    (ii)           Fushi’s
failure to deliver the Escrow Shares to the Escrow Agent at the
Closing;

     

    
      
         


      

      
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    (iii)           Fushi’s
failure to issue the Irrevocable Transfer Agent Instructions to its transfer
agent at Closing;

     

    (iv)          The
balance due on the Judgment is not paid in full by January 15,
2010;

     

    (v)           Fushi
or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) shall be subject to a Bankruptcy Event;

     

    (vi)          Fushi
or any Subsidiary shall default after the Closing on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than ten percent (10%) of Fushi’s total assets, whether
such indebtedness now exists or shall hereafter be created, and (b) results in
such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable; provided, however, that any
default by Copperweld Bimetallics Holdings, LLC or Copperweld Bimetallics, LLC,
and any default caused by such a default shall not constitute a Default
hereunder;

     

    (vii)         Fushi’s
Common Stock shall not be eligible for listing or quotation for trading on the
NASDAQ Global Select Market, NASDAQ Global Market or the NASDAQ Capital Market
(“NASDAQ GS”);

     

    (viii)        Fushi
causes, directly or indirectly, the Escrow Agent to do any of the following: (i)
refuse to follow Kuhns’ instructions regarding the sale of Escrow Shares; (ii)
refuse to pay Kuhns the cash proceeds arising from the sale of Escrow Shares; or
(ii) refuse to deliver Restricted Shares to Kuhns.

     

    (ix)           Fushi
does not meet the current public information, requirements under Rule 144;
or

     

    (x)      
     Fushi shall fail to discontinue its
appeal.

     

    Upon a
Default, Kuhns shall be entitled to enforce the balance due under the Judgment
and also to recover from Fushi all costs, including reasonable attorneys fees,
incurred in enforcing the Judgment and its rights hereunder.

     

    10.           Entire
Understanding.  No statements, promises or representations have
been made by any Party to any other, or relied upon, and no consideration has
been offered, promised, expected or held out other than as may be expressly
provided herein.  This Agreement sets forth the entire understanding
of the Parties with respect to the subject matter hereof, and supersedes all
prior contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the
Parties.  This Agreement may be amended only by a writing executed by
each of the Parties on the subject matter hereof.

     

    
      
         


      

      
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    11.           Other
Securities.  Nothing in this Agreement shall affect the
ownership rights of Kuhns, or any Releasor under Section 5, in any Fushi common
stock or warrants issued prior to this date.

     

    12.           Representations and
Warranties.  Each Party hereto represents and warrants that
(a) it has not heretofore assigned or transferred, or purported to assign
or transfer, to any person or entity not a Party hereto any claim, debt,
covenant, agreement, contract, liability, demand, obligation, account, expense,
action, cause of action or suit being released hereunder; (b) each Party
has full right, power and authority to execute and deliver this Agreement, and
to consummate the transactions contemplated hereby; (c) each Party holds
all right, title and interest in and to any securities tendered by it to the
other Party pursuant to this Agreement; (d) all acts or proceedings
required to be taken by the Parties to authorize the execution, delivery and
performance of this Agreement, and the consummation of all the transactions
contemplated hereby, have been duly and properly taken; (e) no consent, approval
or authorization of any third party is required in order to consummate the
transactions contemplated by this Agreement or to vest full right, title and
interest in and to the Shares upon Kuhns except as has otherwise already been
obtained; (f) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms and conditions of this Agreement have been duly and validly
authorized by all necessary action on the part of such Party and will not
violate (i) the articles of incorporation, bylaws or other organizational
certificates or documents of such Party, as amended to date; (ii) to such
Party’s knowledge, any order, judgment, injunction, award or decree of any
court, or governmental or regulatory body against, or binding upon, or any
agreement with, or condition imposed by, any governmental or regulatory body,
foreign or domestic, binding upon such Party or upon the properties or business
of such Party, or (iii) to such Party’s knowledge, any statute, law or
regulation of any jurisdiction as such statute, law or regulation relates to
such Party or to the properties or business of such Party; (g) this
Agreement has been duly executed and delivered and constitutes the lawful, valid
and legally binding obligations of each Party enforceable in accordance with
their respective terms.  The parties further agree that Fushi’s
unregistered common stock is difficult to value and that in large amounts, a
volume discount may be appropriate, with or without
registration.  Accordingly, for all U.S. tax reporting purposes, the
Fushi common stock delivered to Kuhns, registered for Kuhns, or sold on its
behalf, shall be deemed to have a value equal to the amount used to calculate
the reduction in the Current Judgment Amount under paragraph 5, provided that in
no event shall such amount exceed the balance due under the
Judgment.

     

    13.           The
Shares.  Fushi further represents, warrants and covenants
that:

     

    (a)           Upon
their issuance to Kuhns or the Escrow Agent, all Fushi common stock will be
validly issued, fully paid and nonassessable and free from all preemptive or
similar rights, taxes, liens and charges with respect to the issue thereof, with
Kuhns being entitled to all rights accorded to a holder of Fushi Common
Stock.

     

    (b)           Kuhns
is not currently, and upon receipt of the Shares will not be, an “affiliate” (as
defined in Rule 144 under the Securities Act) of Fushi or any of its
subsidiaries.

     

    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    14.           Notices.  Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been duly given when received if
personally delivered, sent by facsimile, or by established overnight courier as
follows:

     

    
      	
               
      

            	
              To
      Kuhns:

            	
              Kuhns
      Brothers, Inc.

            


    

    
      	
               
      

            	
              Farmhouse

            


    

    
      	
               
      

            	
              558
      Lime Rock Road

            


    

    
      	
               
      

            	
              Lime
      Rock, Connecticut 06039

            


    

    
      	
               
      

            	
              Attn:
      Mary Fellows

            


    

     

    
      	
               
      

            	
              with
      a copy to:

            	
              Thomas
      J. Fleming, Esq.

            


    

    
      	
               
      

            	
              Olshan
      Grundman Frome Rosenzweig & Wolosky
LLP

            


    

    
      	
               
      

            	
              Park
      Avenue Tower

            


    

    
      	
               
      

            	
              65
      East 55th Street

            


    

    
      	
               
      

            	
              New
      York, New York 10022

            


    

     

    
      	
               
      

            	
              To
      Fushi:

            	
              Fushi
      International, Inc.

            


    

    
      	
               
      

            	
              1
      Shuang Qiang Road, Jin Zhou

            


    

    
      	
               
      

            	
              Dalian
      China 116100

            


    

    
      	
               
      

            	
              Attn:
      Chris Wang

            


    

     

    
      	
               
      

            	
              with
      a copy to:

            	
              Darren
      Ofsink, Esq.

            


    

    
      	
               
      

            	
              Guzov
      Ofsink LLC

            


    

    
      	
               
      

            	
              600
      Madison Avenue

            


    

    
      	
               
      

            	
              New
      York, New York 10022

            


    

     

    15.           Counterparts.  This
Agreement may be executed in any number of counterparts and by facsimile, each
of which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.

     

    16.           Successors and
Assigns.  This Agreement shall inure to the benefit of, be
binding upon and enforceable by the successors and assigns of Fushi and
Kuhns.

     

    17.           Governing Law and
Venue.  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 Honorable Peter
Dorsey 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.

     

    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    18.           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.

     

    19.           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.

     

    20.           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.

     

    21.           Captions.  Caption
headings of this Agreement are inserted for convenience purposes and are to have
no substantive effect.

     

    22.           Definitions.

     

    “Bankruptcy Event”
means any of the following events: (a) Fushi or any Significant Subsidiary (as
such term is defined in Rue 1-02(w) of Regulation S-X) thereof commences a case
or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution insolvency or liquidation or
similar law of any jurisdiction relating to Fushi or any Significant Subsidiary
thereof, (b) there is commenced against Fushi or any Significant Subsidiary
thereof any such case or proceeding that is not dismissed within 60 days after
commencement, (c) Fushi or any Significant Subsidiary thereof is adjudicated
insolvent or bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) Fushi or any Significant Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property, (e) Fushi or any Significant Subsidiary thereof makes a
general assignment for the benefit of creditors, (f) Fushi or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts or (g) Fushi or any
Significant Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.

     

    “Trading Day” means a
day on which the New York Stock Exchange is open for business.

     

    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    “VWAP” means, for any
date, the price determined by the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the NASDAQ GS as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time)).

     

    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the Parties have each duly executed this Agreement as of the
date first above written.

     

    
      	 
      	
              KUHNS
      BROTHERS, INC.

            
	 
      	 
      
	 
      	
              By:

            	/s/
      John D. Kuhns  
	 
      	 
      	 
      


    

     

    
      	 
      	
              KUHNS
      BROS. & CO., INC.

            
	 
      	 
      
	 
      	
              By:

            	/s/
      John D. Kuhns
	 
      	 
      	 
      


    

     

    
      	 
      	
              KUHNS
      BROTHERS SECURITIES CORP.

            
	 
      	 
      
	 
      	
              By:

            	/s/
      John D. Kuhns
	 
      	 
      	 
      


    

     

    
      	 
      	
              FUSHI
      INTERNATIONAL, INC.

            
	 
      	 
      
	 
      	
              By:

            	/s/
      Chris Wang  
	 
      	 
      	 
      


    

     

    
      	 
      	
              DALIAN
      FUSHI BIMETALLIC

              MANUFACTURING
      COMPANY LTD.

            
	 
      	 
      
	 
      	
              By:

            	/s/
      Chris Wang
	 
      	 
      	 
      


    

     

    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    Exhibit
A

    


    ESCROW
AGREEMENT

     

    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”), Kuhns
Brothers, Inc., Kuhns Brothers Securities Corp., and Kuhns Bros. & Co. Inc.
(collectively and separately “Kuhns”), and Continental Stock Transfer &
Trust Company (the “Escrow Agent”).  Fushi, Kuhns and the Escrow Agent
are sometimes referred to herein, individually, as a “Party,” and, collectively,
as the “Parties.”

     

    WHEREAS,
Fushi and Kuhns 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 Kuhns, 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 Kuhns 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 Kuhns 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 Kuhns 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 Kuhns 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 Bishop Rosen & Co., Inc., (“Brokerage
Account”) and will thereafter sell shares in such amounts and at such times as
Kuhns directs; upon each sale, the cash proceeds shall be forwarded to Kuhns,
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 Kuhns 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 Kuhns 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 Kuhns 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, Kuhns 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 Kuhns 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.


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    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, Kuhns shall execute and deliver an irrevocable proxy authorizing
Mr. Li 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 Kuhns 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.


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    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 Kuhns shall not be borne or reimbursed by
Fushi.

     

    7.4.           Further
Assurances.  From time to time on and after the date hereof,
Fushi and Kuhns 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 Kuhns, 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 Honorable Peter
Dorsey 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.


    
      
         


      

      
        18

        
          

        

      

      
         


      

    


    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:


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              To
      Kuhns:

            	
              Kuhns
      Brothers, Inc.

            


    

    
      	
               
      

            	
              Farmhouse

            


    

    
      	
               
      

            	
              558
      Lime Rock Road

            


    

    
      	
               
      

            	
              Lime
      Rock, Connecticut 06039

            


    

    
      	
               
      

            	
              Attn:
      Mary Fellows

            


    

     

    
      	
               
      

            	
              with
      a copy to:

            	
              Thomas
      J. Fleming, Esq.

            


    

    
      	
               
      

            	
              Olshan
      Grundman Frome Rosenzweig & Wolosky
LLP

            


    

    
      	
               
      

            	
              Park
      Avenue Tower

            


    

    
      	
               
      

            	
              65
      East 55th Street

            


    

    
      	
               
      

            	
              New
      York, New York 10022

            


    

     

    
      	
               
      

            	
              To
      Fushi:

            	
              Fushi
      International, Inc.

            


    

    
      	
               
      

            	
              1
      Shuang Qiang Road, Jin Zhou

            


    

    
      	
               
      

            	
              Dalian
      China 116100

            


    

    
      	
               
      

            	
              Attn:
      Chris Wang

            


    

     

    
      	
               
      

            	
              with
      a copy to:

            	
              Darren
      Ofsink, Esq.

            


    

    
      	
               
      

            	
              Guzov
      Ofsink LLC

            


    

    
      	
               
      

            	
              600
      Madison Avenue

            


    

    
      	
               
      

            	
              New
      York, New York 10022

            


    

     

    
      	
            	
              To
      the Escrow Agent:

            	
              Continental
      Stock Transfer & Trust Company

            


    

    
      	
               
      

            	
              17
      Battery Place

            


    

    
      	
               
      

            	
              New
      York, New York 10004

            


    

    
      	
               
      

            	
              Attn:
      Chairman

            


    

     

    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]


    
      
         


      

      
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    IN
WITNESS WHEREOF, the Parties have each duly executed this Agreement as of the
date first above written.

     

    
      	 
      	
              KUHNS
      BROTHERS, INC.

            
	 
      	 
      
	 
      	
              By: 

            	 
      
	 
      	 
      	 
      


    

    


    
      	 
      	
              KUHNS
      BROS. & CO., INC.

            
	 
      	 
      
	 
      	
              By: 

            	 
      
	 
      	 
      	 
      


    

    


    
      	 
      	
              KUHNS
      BROTHERS SECURITIES CORP.

            
	 
      	 
      
	 
      	
              By: 

            	 
      
	 
      	 
      	 
      


    

    


    
      	 
      	
              FUSHI
      INTERNATIONAL, INC.

            
	 
      	 
      
	 
      	
              By: 

            	 
	 
      	 
      	 
      


    

    


    
      	 
      	
              DALIAN
      FUSHI BIMETALLIC MANUFACTURING COMPANY LTD.

            
	 
      	 
      
	 
      	
              By:

            	 
	 
      	 
      	 
      


    

    


    
      	 
      	
              CONTINENTAL
      STOCK TRANSFER & TRUST COMPANY

            
	 
      	 
      
	 
      	
              By:

            	 
	 
      	 
      	 
      


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Exhibit
B

     

    FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

     

    
      
        

      

    

     

    as of
____________, 2009

     

    Continental
Stock Transfer

     

    Attn:
_____________

     

    Ladies
and Gentlemen:

     

    Reference
is made to that certain Settlement and Forbearance Agreement and Release (the
“Settlement Agreement”),
dated as of May __, 2009 and Escrow Agreement dated May __, 2009 (the “Escrow Agreement”), copies of
which are annexed hereto, pursuant to which the Company is issuing to the Escrow
Agent, for further issuance to Kuhns Brothers, Inc. (“KUHNS”) shares of its $0.006
par value per share common stock (“Common
Stock”).  This letter shall serve as our irrevocable
authorization and direction to you to reissue shares of Common Stock held by the
Escrow Agent to Kuhns upon receipt of (i) a certificate or certificates from the
Escrow Agent and (ii) written instructions from the Escrow Agent. In the event
that the foregoing conditions are satisfied, the shares shall not bear any
legend restricting transfer and should not be subject to any stop-transfer
restriction.

     

    Please be
advised that Kuhns is relying upon this letter as an inducement to enter into
the Settlement Agreement and Escrow Agreement and, accordingly, Kuhns is a third
party beneficiary to these instructions.

     

    Please
execute this letter in the space indicated to acknowledge your agreement to act
in accordance with these instructions.  Should you have any questions
concerning this matter, please contact me at ___________.

     

    
      
        	
                Very
      truly yours,

              
	 
      
	
                [__________________________________]

              
	 
      
	
                By: 

              	 
      
	 
      
	
                Name: 

              	 
      
	 
      
	
                Title: 

              	 
      


      

    


    
      
         


      

      
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                            ACKNOWLEDGED
      AND AGREED:

                          
	 
      
	
                            TRANSFER
      AGENT

                          
	 
      
	
                            By:

                          	 
      
	 	 
	
                            Name: 

                          	 
      
	 	 
	
                            Title: 

                          	 
      
	 	 
	
                            Date: 

                          	 
      


                  

                

              

            

          

        

      

    


    
      
         


      

      
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