0001144204-07-005033.txt : 20070202 0001144204-07-005033.hdr.sgml : 20070202 20070202154528 ACCESSION NUMBER: 0001144204-07-005033 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20070202 DATE AS OF CHANGE: 20070202 GROUP MEMBERS: CITADEL EQUITY FUND LTD. GROUP MEMBERS: CITADEL INVESTMENT GROUP (HONG KONG) LIMITED GROUP MEMBERS: CITADEL INVESTMENT GROUP, L.L.C. GROUP MEMBERS: KENNETH GRIFFIN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FUSHI INTERNATIONAL INC CENTRAL INDEX KEY: 0000710846 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 133140715 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-46672 FILM NUMBER: 07576461 BUSINESS ADDRESS: STREET 1: 1 SHUANG QIANG ROAD, JINZHOU CITY: DALIAN STATE: F4 ZIP: 116100 BUSINESS PHONE: (860)435-7000 MAIL ADDRESS: STREET 1: 1 SHUANG QIANG ROAD, CITY: JINZHOU DALIAN F4 STATE: F4 ZIP: 116100 FORMER COMPANY: FORMER CONFORMED NAME: PARALLEL TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: M INC DATE OF NAME CHANGE: 19910613 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CITADEL L P CENTRAL INDEX KEY: 0001027745 IRS NUMBER: 364111741 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 131 S. DEARBORN STREET, 32ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123952100 MAIL ADDRESS: STREET 1: 131 S. DEARBORN STREET, 32ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60603 SC 13D 1 v063988_sc13d.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. _______)*

FUSHI INTERNATIONAL, INC.

(Name of Issuer)

Common Stock, $0.006 par value

(Title of Class of Securities)

36113C101

(CUSIP Number)

Matthew B. Hinerfeld

Citadel Investment Group, L.L.C.

131 S. Dearborn Street, 32nd Floor

Chicago, Illinois 60603

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

January 25, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


Cusip No. 36113C101		Page 2 of 12 Pages

1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
	Citadel Limited Partnership

2.	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a)	X
	(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions) AF

5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization Illinois

	7.	Sole Voting Power 0

	8.	Shared Voting Power 14,772,998 shares⁽¹⁾

	9.	Sole Dispositive Power 0

	10.	Shared Dispositive Power 2,857,000 shares⁽²⁾

11.	Aggregate Amount Beneficially Owned by Each Reporting Person See Row 8 above.

12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount in Row (11) 64.7%⁽³⁾

14.	Type of Reporting Person (See Instructions) PN; HC

(1)

Includes 11,915,998 shares of the common stock of Issuer beneficially owned by Mr. Fu Li over which the Reporting Persons may be deemed to have shared voting power pursuant to the Investor Rights Agreement (as hereinafter defined), under which Mr. Li has agreed to vote all shares of the common stock of the Issuer owned by him to ensure that nominees of the Reporting Persons are elected to the Board of Directors of Issuer. The Reporting Persons expressly disclaim beneficial ownership of the shares beneficially owned by Mr. Li.

(2)	Includes 2,857,000 shares of the common stock of Issuer that may be acquired upon conversion of $20,000,000 in principal amount of the Issuer’s Convertible Notes (as defined herein) beneficially owned by the Reporting Persons.

(3)	Based on 19,990,087 outstanding shares of the common stock of the Issuer, as set forth in the Purchase Agreement (as hereinafter defined).


Cusip No. 36113C101		Page 3 of 12 Pages

1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
	Citadel Investment Group, L.L.C.

2.	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a)	X
	(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions) AF

5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization Delaware

	7.	Sole Voting Power 0

	8.	Shared Voting Power 14,772,998 shares⁽⁴⁾

	9.	Sole Dispositive Power 0

	10.	Shared Dispositive Power 2,857,000 shares⁽⁵⁾

11.	Aggregate Amount Beneficially Owned by Each Reporting Person See Row 8 above.

12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount in Row (11) 64.7%⁽⁶⁾

14.	Type of Reporting Person (See Instructions) OO; HC

(4)	See footnote 1, above.

(5)	See footnote 2, above.

(6)	See footnote 3, above.


Cusip No. 36113C101		Page 4 of 12 Pages

1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
	Citadel Investment Group (Hong Kong) Limited

2.	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a)	X
	(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions) AF

5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization Hong Kong

	7.	Sole Voting Power 0

	8.	Shared Voting Power 14,772,998 shares⁽⁷⁾

	9.	Sole Dispositive Power 0

	10.	Shared Dispositive Power 2,857,000 shares⁽⁸⁾

11.	Aggregate Amount Beneficially Owned by Each Reporting Person See Row 8 above.

12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount in Row (11) 64.7%⁽⁹⁾

14.	Type of Reporting Person (See Instructions) CO

(7)	See footnote 1, above.

(8)	See footnote 2, above.

(9)	See footnote 3, above.


Cusip No. 36113C101		Page 5 of 12 Pages

1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
	Kenneth Griffin

2.	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a)	X
	(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions) AF

5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization United States

	7.	Sole Voting Power 0

	8.	Shared Voting Power 14,772,998 shares⁽¹⁰⁾

	9.	Sole Dispositive Power 0

	10.	Shared Dispositive Power 2,857,000 shares⁽¹¹⁾

11.	Aggregate Amount Beneficially Owned by Each Reporting Person See Row 8 above.

12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount in Row (11) 64.7%⁽¹²⁾

14.	Type of Reporting Person (See Instructions) IN; HC

(10)	See footnote 1, above.

(11)	See footnote 2, above.

(12)	See footnote 3, above.


Cusip No. 36113C101		Page 6 of 12 Pages

1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
	Citadel Equity Fund Ltd.

2.	Check the Appropriate Box if a Member of a Group (See Instructions)
	(a)	X
	(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions) WC

5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization Cayman Islands

	7.	Sole Voting Power 0

	8.	Shared Voting Power 14,772,998 shares⁽¹³⁾

	9.	Sole Dispositive Power 0

	10.	Shared Dispositive Power 2,857,000 shares⁽¹⁴⁾

11.	Aggregate Amount Beneficially Owned by Each Reporting Person See Row 8 above.

12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount in Row (11) 64.7%⁽¹⁵⁾

14.	Type of Reporting Person (See Instructions) CO

(13)	See footnote 1, above.

(14)	See footnote 2, above.

(15)	See footnote 3, above.


Cusip No. 36113C101		Page 7 of 12 Pages

Item 1.

Security and Issuer

This Schedule 13D relates to the Common Stock, par value $0.006 (the “Common Stock”), of Fushi International, Inc., a Nevada corporation (the “Issuer”). The principal executive offices of the Issuer are located at 1 Shuang Qiang Road, Jinzhou, Dalian, People’s Republic of China 116100.

Item 2.

Identity and Background

The persons filing this Schedule 13D are Citadel Limited Partnership, an Illinois limited partnership (“CLP”), Citadel Investment Group, L.L.C., a Delaware limited liability company (“CIG”), Citadel Investment Group (Hong Kong) Limited, a Hong Kong company (“CIGHK”), Kenneth Griffin, a natural person (“Griffin”) and Citadel Equity Fund Ltd., a Cayman Islands company (“CEF,” and collectively, together with CLP, CIG, CIGHK and Griffin, the “Reporting Persons”).

CLP provides investment advisory services to investment funds. CLP is the investment advisor for CEF and, in such capacity, makes all of the investment decisions for CEF.

CIG provides administrative and management services to its affiliated entities. CIG is the general partner of CLP. The name, residence or business address, present principal occupation or employment and citizenship of each director and executive officer of CIG is set forth on Schedule A attached hereto.

CIGHK provides investment advisory services to CLP with respect to Hong Kong-based investment activities. CIG owns 100% of CIGHK. The name, residence or business address, present principal occupation or employment and citizenship of each director and executive officer of CIGHK is set forth on Schedule A attached hereto.

Griffin is the President and Chief Executive Officer of CIG and owns a controlling interest in CIG. Griffin is a United States citizen.

CEF purchases, holds and sells securities and other investment products. The name, residence or business address, present principal occupation or employment and citizenship of each director and executive officer of CEF is set forth on Schedule A attached hereto. Citadel Wellington LLC, a Delaware limited liability company (“CW”), and Citadel Kensington Global Strategies Fund Ltd., a Bermuda company (“CKGSF”), collectively own 100% of Citadel Holdings Ltd., a Cayman Island company (“CH”), which owns 100% of CEF; however, none of CW, CKGSF or CH has any control over the voting or disposition of securities held by CEF.

For CLP, CIG, Griffin and CEF, the principal business address is 131 S. Dearborn Street, 32nd Floor, Chicago, Illinois 60603. For CIGHK, the principal business address is Suites 1801-1810, Chater House, 8 Connaught Road Central, Hong Kong.

During the last five years, none of the Reporting Persons, nor, to the best of each of the Reporting Persons’ knowledge, any of the persons listed on Schedule A attached hereto, has been a party to a civil proceeding of any judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding of any violation with respect to such laws.


Cusip No. 36113C101		Page 8 of 12 Pages

The Reporting Persons have entered into a Joint Filing Agreement, dated as of January 26, 2007, a copy of which is attached hereto as Exhibit 99.1.

Item 3.

Source and Amount of Funds or Other Consideration

The Reporting Persons utilized available cash assets in the amount of $18,000,000, and secured financing from Merrill Lynch International in the amount of $42,000,000 (the “Financing”), for the purchase of (i) $40,000,000 of the principal amount of the Issuer’s Guaranteed Senior Secured Floating Rate Notes due 2012 (the “HY Notes”), and (ii) $20,000,000 of the principal amount of the Issuer’s 3.0% Guaranteed Senior Secured Convertible Notes due 2012 (the “Convertible Notes” and, collectively with the HY Notes, the “Notes”). The Financing was provided on January 25, 2007 out of the Reporting Persons’ Prime Brokerage Account with Merrill Lynch International. Pursuant to the Financing arrangement, the Reporting Persons’ posted thirty percent (30%) of the total value of the transaction and Merrill Lynch International paid the remaining seventy percent (70%). The interest rate on the Financing is equal to the Reporting Persons’ standard prime broker rate with Merrill Lynch International, which is 1 week Libor plus 30 basis points, and the Financing has no definitive maturity date.

The 11,915,998 shares of Common Stock beneficially owned by Mr. Fu Li were not purchased by the Reporting Persons, but are reported herein because the Reporting Persons may be deemed to share voting power over such shares pursuant to an Investor Rights Agreement (as defined herein), under which Mr. Li has agreed to vote all shares of the common stock of the Issuer owned by him to ensure that nominees of the Reporting Persons are elected to the Board of Directors of the Issuer.

Item 4.

Purpose of Transaction

The Reporting Persons purchased the Notes, and will acquire shares of Common Stock of the Issuer upon exercise of the Convertible Notes, for investment purposes. See Item 6 below for a description of the terms of the Notes.

The Issuer, Mr. Fu Li, CEF, Fushi Holdings, Inc., a Delaware corporation, Dalian Fushi Bimetallic Manufacturing Company Limited, a limited liability company organized and existing under the laws of the People’s Republic of China, Fushi International (Dalian) Bimetallic Cable Co., Ltd., a wholly foreign-owned limited liability company organized and existing under the laws of the People’s Republic of China, Mr. Mathus Yang Yue and Mr. Chris Wang Wenbing entered into an investor rights agreement, dated January 25, 2007 (the “Investor Rights Agreement”), pursuant to which the Reporting Persons are entitled to appoint up to twenty percent (20%) of the voting members (or the next higher whole number if such percentage does not yield a whole number) of the Issuer’s board of directors (the “Board”) for so long as CEF holds more than five percent (5%) of the outstanding shares of the Issuer’s Common Stock on an as-converted basis. If, however, there occurs any Financial and Operational Trigger (as defined in the CB Indenture (as hereinafter defined)) while CEF holds more than five percent (5%) of the outstanding shares of the Issuer’s Common Stock on an as-converted basis, the Reporting Persons will have the right to appoint one additional voting member of the Issuer’s Board. Pursuant to the Investor Rights Agreement, the Issuer agreed to take all appropriate actions to fix and maintain a Board of no more than seven (7) voting members, and the Issuer may not change the number of such Board members without CEF’s prior written approval.

The Reporting Persons may exercise such right to appoint Board members by providing written notice to the Issuer that informs the Issuer of its election to be represented on the Board and states the names of the individuals to be nominated to the Board (the “CEF Nominees”). Pursuant to the Investor Rights Agreement, Mr. Li agrees to vote, or cause to be voted, all shares of Common Stock owned by him, or over which he has voting control, to ensure that at each annual or special meeting of shareholders at which an election of directors is held or pursuant to any written consent of the shareholders, the CEF Nominees are duly elected to the Board. A copy of the Investor Rights Agreement is attached as Exhibit 99.8 to this filing.


Cusip No. 36113C101		Page 8 of 12 Pages

The Reporting Persons may discuss their investment in the Issuer with other shareholders, management, the Board, other investors, industry analysts, existing or potential strategic partners or competitors and others. In addition, the Reporting Persons may acquire additional Issuer securities or may determine to sell, trade, distribute to affiliates or otherwise dispose of all or some holdings in the Issuer or take any other lawful action they deem to be in their best interests. Subject to applicable law, the Reporting Persons may enter into derivative transactions, hedging transactions or alternative structures with respect to the Issuer’s securities.

There is no assurance that the Reporting Persons will develop any plans or proposals with respect to any of the matters discussed above, and the Reporting Persons may, at any time, review or reconsider their position with respect to the Issuer and reserve the right to develop such plans or proposals. Any courses of action that the Reporting Persons pursue will depend on a variety of factors, including, without limitation, current and anticipated future trading price for the Issuer’s Common Stock, the financial condition, results of operation and prospects of the Issuer, discussions with other parties, and general economic, financial market and industry conditions.

Except as set forth herein, none of the Reporting Persons, nor, to the knowledge of the Reporting Persons, any individuals listed in response to Item 2 hereof, has any present plans or proposals that would result in or relate to any of the transactions or changes listed in Items 4(a) through 4(j) of Schedule 13D.

Item 5.

Interest in Securities of the Issuer

(a)	Number of Shares	Percentage of Shares

	14,772,998 shares⁽¹⁶⁾	64.7%⁽¹⁷⁾

(b)	Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 14,772,998 shares⁽¹⁸⁾

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or direct the disposition: 2,857,000 shares⁽¹⁹⁾

(c) Other than the transactions described in this Schedule 13D, the Reporting Persons have not engaged in any transactions with respect to the Issuer’s securities during the last sixty days.

(d) Not applicable.

(e) Not applicable.


Cusip No. 36113C101		Page 10 of 12 Pages

⁽¹⁶⁾

Includes 11,915,998 shares of the common stock of Issuer beneficially owned by Mr. Fu Li over which the Reporting Persons may be deemed to have shared voting power pursuant to the Investor Rights Agreement, under which Mr. Li has agreed to vote all shares of the common stock of the Issuer owned by him to ensure that nominees of the Reporting Persons are elected to the Board. The Reporting Persons expressly disclaim beneficial ownership of the shares beneficially owned by Mr. Li.

⁽¹⁷⁾	Based on 19,990,087 outstanding shares of the common stock of the Issuer, as set forth in the Purchase Agreement (as hereinafter defined).

⁽¹⁸⁾	See footnote 16, above.

⁽¹⁹⁾	Includes 2,857,000 shares of the common stock of Issuer that may be acquired upon conversion of $20,000,000 in principal amount of the Issuer’s Convertible Notes beneficially owned by the Reporting Persons.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

The matters set forth in Item 4 are incorporated into this Item 6 by reference as if fully set forth herein.

On January 24, 2007, the Issuer, Fushi Holdings, Inc. (formerly, Diversified Product Inspections, Inc.), a wholly-owned subsidiary of the Issuer (“FHI”), Fushi International (Dalian) Bimetallic Cable Co., Ltd. (formerly, Dalian Diversified Product Inspections Bimetallic Cable Co., Ltd.), a wholly-owned subsidiary of FHI (“FID”), Dalian Fushi Bimetallic Manufacturing Co., Ltd. (“DF”) and CEF entered into a Notes Purchase Agreement (the “Notes Purchase Agreement”) pursuant to indicative financing term sheets dated December 19, 2006 by and between the Issuer and CEF. Pursuant to the terms of the Notes Purchase Agreement, the Issuer offered and sold and CEF purchased (i) $40,000,000 of the principal amount of the Issuer’s Guaranteed Senior Secured Floating Rate Notes due 2012 (the “HY Notes”), and (ii) $20,000,000 of the principal amount of the Issuer’s 3.0% Guaranteed Senior Secured Convertible Notes due 2012 (the “Convertible Notes” and, collectively with the HY Notes, the “Notes”). Each $100,000 principal amount of the Convertible Notes is initially convertible into 14,285 shares of the Issuer’s Common Stock at an initial conversion rate of approximately $7.00 per share, which rate shall be adjusted from time to time by the Issuer as set forth in the CB Indenture (as defined herein). The offer and sale of the Notes were made in an offshore transaction pursuant to Regulation S under the Securities Act of 1933, as amended. The transaction closed on January 25, 2007.

The HY Notes and the Convertible Notes were issued pursuant to indentures, each dated January 25, 2007 (the “HY Indenture” and “CB Indenture”, respectively, and together, the “Indentures”) among the Issuer, FHI, as guarantor, and The Bank of New York, as trustee for the Notes. Pursuant to the Indentures, FHI has agreed, and all of the Issuer’s other existing and future subsidiaries in the United States are obligated, to guarantee to the holders of the Notes and the trustee the payment and performance of the Issuer’s obligations thereunder. The terms of the Indentures prohibit the Issuer from, among other things, (i) incurring any debt except for Permitted Debt (as defined in the Indentures) or if the Issuer meets certain financial ratios, (ii) making, directly or indirectly, certain Restricted Payments (as defined in the Indentures), (iii) incurring any liens other than Permitted Liens (as defined in the Indentures), (iv) consummating any asset sale unless the consideration received for such sale is at least equal to the fair market value of the sold assets and at least seventy five percent (75%) of the consideration paid in connection with such sale is in the form of cash or cash equivalents, (v) permitting any of the Issuer’s Subsidiaries (as defined in the Indentures) to, directly or indirectly, create or cause any consensual restriction on the right of any Subsidiary to make certain distributions or transfers, (vi) entering into any transaction or series of transactions with, or for the benefit of, any affiliate of the Issuer unless such transaction meets certain conditions, and (vii) disposing of the capital stock of any of its Subsidiaries or permitting any of its Subsidiaries from issuing or selling or otherwise disposing of any shares of such Subsidiary’s capital stock other than under certain conditions.

As security for the Notes, the Issuer and The Bank of New York, as collateral agent, entered into a share pledge agreement, dated January 25, 2007 (the “Share Pledge Agreement”), to guarantee the Notes with all of the shares of common stock of FHI held by the Issuer as collateral.


Cusip No. 36113C101		Page 11 of 12 Pages

The Investor Rights Agreement described in Item 4 above was also entered into in connection with the transaction. In addition to the Reporting Persons’ Board appointment rights described in Item 4, the Investor Rights Agreement grants CEF, subject to certain conditions, a right of first refusal with respect to any financing sought by the Issuer and the right to approve the Issuer’s annual business plan and budget. In addition, pursuant to the Investor Rights Agreement, Messrs. Li, Yang and Wang agreed to a non-competition covenant relating to their employment and ability to engage in a business that is competitive with the Issuer’s business for five years.

Each of the Notes Purchase Agreement, the Notes, the Indentures, the Share Pledge Agreement and the Investor Rights Agreement sets forth certain other rights and obligations of the parties. The foregoing summaries of the terms of the Notes Purchase Agreement, the Notes, the Indentures, the Share Pledge Agreement and the Investor Rights Agreement are qualified by reference to the full text of each of the Notes Purchase Agreement, the Notes, the Indentures, the Share Pledge Agreement and the Investor Rights Agreement, each of which is incorporated by reference in Item 7 below.

Other than as described above and elsewhere in this filing, the Reporting Persons have no understandings, arrangements, relationships or contracts relating to the Issuer’s Common Stock that are required to be described hereunder.

Item 7.

Material to Be Filed as Exhibits

99.1

Joint Filing Agreement, dated as of February 2, 2007, by and among Citadel Investment Group (Hong Kong) Limited, Citadel Equity Fund Ltd., Citadel Limited Partnership, Citadel Investment Group, L.L.C. and Kenneth Griffin.

99.2

Notes Purchase Agreement among the Issuer, FHI, FID, FD and CEF, dated January 24, 2007 (incorporated by reference to Exhibit 4.1 to the Issuer’s Form 8-K as filed with the Securities and Exchange Commission on January 26, 2007)

99.3

HY Note

99.4

Convertible Note

99.5

HY Indenture among the Issuer, FHI and The Bank of New York, dated January 25, 2007 (incorporated by reference to Exhibit 4.2 to the Issuer’s Form 8-K as filed with the Securities and Exchange Commission on January 26, 2007)

99.6

CB Indenture among the Issuer, FHI and The Bank of New York, dated January 25, 2007 (incorporated by reference to Exhibit 4.3 to the Issuer’s Form 8-K as filed with the Securities and Exchange Commission on January 26, 2007)

99.7

Share Pledge Agreement between the Issuer and The Bank of New York, as collateral agent, dated January 25, 2007 (incorporated by reference to Exhibit 4.4 to the Issuer’s Form 8-K as filed with the Securities and Exchange Commission on January 26, 2007)

99.8

Investor Rights Agreement among the Issuer, FHI, FID, DF, Mr. Fu Li, Mr. Mathus Yang Yue, Mr. Chris Wang Wenbing and CEF, dated January 25, 2007 (incorporated by reference to Exhibit 4.5 to the Issuer’s Form 8-K as filed with the Securities and Exchange Commission on January 26, 2007)


Cusip No. 36113C101		Page 12 of 12 Pages

Signature

After reasonable inquiry and to the best of its knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

Dated this 2^nd day of February, 2007.

KENNETH GRIFFIN

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, attorney-in-fact*

CITADEL INVESTMENT GROUP, L.L.C.

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL LIMITED PARTNERSHIP

By: Citadel Investment Group, L.L.C.,
its General Partner

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL EQUITY FUND LTD.

By: Citadel Limited Partnership,
its Portfolio Manager

By: Citadel Investment Group, L.L.C.,
its General Partner

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL INVESTMENT GROUP (HONG KONG) LIMITED

By: Citadel Investment Group, L.L.C.,
its Sole Shareholder

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

* Matthew B. Hinerfeld is signing on behalf of Kenneth Griffin as attorney-in-fact pursuant to a power of attorney previously filed with the Securities and Exchange Commission on February 4, 2005, and hereby incorporated by reference herein. The power of attorney was filed as an attachment to a filing by Citadel Limited Partnership on Schedule 13G/A for Komag, Incorporated.

SCHEDULE A

Directors And Executive Officers Of Citadel Investment Group, L.L.C.

The name, business address, title, present principal occupation or employment and citizenship of the sole executive officer of Citadel Investment Group, L.L.C. (“CIG”) is set forth below. The business address of such officer is 131 S. Dearborn Street, 32ndFloor, Chicago, Illinois 60603. CIG has no directors.

Name	Title and Present Principal Occupation	Citizenship
Kenneth Griffin	President and Chief Executive Officer of CIG	United States

Directors And Executive Officers Of Citadel Equity Fund Ltd.

The name, title, present principal occupation or employment, residence or business address and citizenship of each of the directors and executive officers of Citadel Equity Fund Ltd. (“CEF”) are set forth below.

Name and Citizenship	Title at CEF	Present Principal Occupation and Residence or Business Address (Principal Business of Employer)
Austin John O’Connor	Director and Vice President	Company director
United Kingdom		4 rue de l’eglise
		Wormeldange, Luxembourg L-5481

Adam C. Cooper United States	Director and Assistant Secretary	Senior Managing Director and General Counsel
		Citadel Investment Group, L.L.C.
		135 South Dearborn
		Chicago, IL 60603

Robin Bedford United Kingdom	Director, President and Secretary	President Dundee Leeds Management Services Ltd.
		129 Front Street
		Hamilton HM 12
		Bermuda
		(business services)

Directors And Executive Officers Of Citadel Investment Group (Hong Kong) Limited

The name, title, present principal occupation or employment, residence or business address and citizenship of each of the directors and executive officers of Citadel Investment Group (Hong Kong) Limited (“CIGHK”) are set forth below.

Name and Citizenship	Title at CEF	Present Principal Occupation and Residence or Business Address (Principal Business of Employer)
Gerald A. Beeson United States	Director	Chief Financial Officer Citadel Investment Group, L.L.C. 135 South Dearborn Chicago, IL 60603



Adam C. Cooper United States	Director	Senior Managing Director and General Counsel
		Citadel Investment Group, L.L.C.
		135 South Dearborn
		Chicago, IL 60603

Tim Throsby Australia	Director	President of Citadel Investment Group (Asia) Ltd. and President of Citadel Investment Group (Hong Kong) Limited Citadel Investment Group (Hong Kong) Limited Chater House Suites 1801-10 18th Floor 8 Connaught Road Central, Hong Kong





Linklaters Company Secretarial Services Limited Hong Kong	Secretary	Law Firm 10th Floor, Alexandra House 18 Chater Road Hong Kong China

EX-99.1 2 v063988_ex99-1.htm

EXHIBIT 99.1 - JOINT FILING AGREEMENT

Joint Filing Agreement

The undersigned hereby agree that the Statement on Schedule 13D filed herewith (and any amendments thereto), relating to the common stock, par value $0.006 per share, of Fushi International, Inc., a Nevada corporation, is being filed jointly with the Securities and Exchange Commission pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, on behalf of each of the undersigned.

This Agreement may be executed in counterparts and each of such counterparts taken together shall constitute one and the same instrument.

February 2, 2007

KENNETH GRIFFIN

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, attorney-in-fact*

CITADEL INVESTMENT GROUP, L.L.C.

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL LIMITED PARTNERSHIP

By: Citadel Investment Group, L.L.C.,
its General Partner

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL EQUITY FUND LTD.

By: Citadel Limited Partnership,
its Portfolio Manager

By: Citadel Investment Group, L.L.C.,
its General Partner

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

CITADEL INVESTMENT GROUP (HONG KONG) LIMITED

By: Citadel Investment Group, L.L.C.,
its Sole Shareholder

By: /s/ Matthew B. Hinerfeld
Matthew B. Hinerfeld, Managing
Director and Deputy General Counsel

EX-99.3 3 v063988_ex99-3.htm

(Face of Note)

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR BANK S.A./N.V. (“EUROCLEAR”), OR CLEARSTREAM BANKING, SOCIÉTÉ ANONYME (“CLEARSTREAM”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF ITS AUTHORIZED NOMINEE OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR OR CLEARSTREAM (AND ANY PAYMENT IS MADE TO ITS AUTHORIZED NOMINEE, OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR OR CLEARSTREAM), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, ITS AUTHORIZED NOMINEE, HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF EUROCLEAR OR CLEARSTREAM OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

UNTIL 40 DAYS AFTER THE LATER OF THE DAY ON WHICH THE NOTES ARE FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S, AS DEFINED BELOW) AND THE DATE OF THE CLOSING OF THE OFFERING OF THE NOTES, AN OFFER OR SALE OF THE NOTES WITHIN THE UNITED STATES (AS DEFINED IN THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT (“RULE 144A”)) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT (“REGULATION S”), (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS 40 DAYS AFTER THE LATER OF THE DATE OF THE COMMENCEMENT OF THE OFFERING AND THE DATE OF ORIGINAL ISSUANCE (OR OF ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE U.S. SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE REGISTRAR AND THE TRANSFER AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE, THE REGISTRAR AND THE TRANSFER AGENT IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATIONS.

THIS NOTE MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40 DAYS AFTER THE LATER OF THE DATE OF THE COMMENCEMENT OF THE OFFERING AND THE DATE OF ORIGINAL ISSUANCE, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S (OR RULE 144A, IF AVAILABLE) UNDER THE SECURITIES ACT.

GUARANTEED SENIOR SECURED FLOATING RATE NOTES DUE 2012

ISIN: XS0280734889

Common Code: 028073488

No. 1

$40,000,000

FUSHI INTERNATIONAL, INC.

promises to pay to The Bank of New York, a New York banking corporation, or registered assigns, as common depositary for Clearstream Banking, sociėtė anonyme (“Clearstream”) and/or Euroclear Bank S.A./N.V. (“Euroclear”), or registered assigns, the principal sum of Forty Million Dollars ($40,000,000) on January 24, 2012, or such greater or lesser principal amount at the Stated Maturity hereof as is indicated in the records of the Trustee and the Common Depositary.

Interest Payment Dates: January 24 and July 24, commencing July 24, 2007.

Record Dates: January 10 and July 10.

Dated: January 25, 2007.

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer.

FUSHI INTERNATIONAL, INC.

By: ________________________

___________________________

Name:

Title:

CERTIFICATE OF AUTHENTICATION

This is one of the Global

Notes referred to in the

within-mentioned Indenture:

THE BANK OF NEW YORK,

a New York banking corporation,

as Trustee

By: _____________________

Authorized Signatory

Dated January 25, 2007

NOTATION OF GUARANTEE

For value received, each Guarantor (which term includes any successor Person under the Indenture), jointly and severally, unconditionally guarantees, to the extent set forth in the Indenture and subject to the provisions in the Indenture, dated January 25, 2007 (the “Indenture”), among Fushi International, Inc., as issuer (the “Company”), the Guarantor listed on the signature pages thereto and The Bank of New York, a New York banking corporation, as trustee (the “Trustee”), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, if any, and, to the extent permitted by law, interest and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 9 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. This Guarantee is subject to release as and to the extent set forth in Section 9.05 of the Indenture. Each Holder of a Note, by accepting the same agrees to and shall be bound by such provisions. Capitalized terms used herein and not defined are used herein as so defined in the Indenture.

FUSHI HOLDINGS, INC.

By:__________________________

Name:

Title:

(Back of Note)

GUARANTEED SENIOR SECURED FLOATING RATE NOTES DUE 2012

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. Interest. FUSHI INTERNATIONAL, INC., a Nevada corporation (the “Company”), promises to pay interest on the principal amount of this Note at the rate per annum, reset semi-annually, equal to LIBOR (as determined by the Calculation Agent from the Issue Date) plus the Margin until maturity. For the avoidance of doubt, LIBOR will be used for all interest periods without interpolation, including the first interest period beginning on the Issue Date and ending on July 24, 2007. The “Margin” shall initially be 7.00% and shall become 5.60% from and after the date of completion of a Qualifying IPO that occurs on or before July 24, 2008. Promptly upon determination, the Calculation Agent will inform the Trustee and the Company of the interest rate for the next interest period. The Company shall pay interest semi-annually on January 24 and July 24 of each year, or if any such day is not a Business Day, on the next succeeding Business Day with the same force and effect and such extension of time shall in such case be included in the computation of Interest accruing on such Note; provided, however, that if such extension would cause payment of Interest to be made in the next following calendar month, such payment shall be made on the next preceding Business Day (each an “Interest Payment Date”). Interest shall accrue from and including the most recent date to which interest has been paid on the Notes (or one or more Predecessor Notes) or, if no interest has been paid, from the date of issuance, to but excluding the following Interest Payment Date; provided, however, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be July 24, 2007. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time at a rate that is 5% per annum in excess of the interest rate then in effect under the Indenture and this Note; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods), from time to time at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed. The amount of interest for each day that the Notes are outstanding (the “Daily Interest Amount”) will be calculated by dividing the interest rate in effect for such day by 360 and multiplying the result by the principal amount of the Notes. The amount of interest to be paid on the Notes for each Interest Period will be calculated by adding the Daily Interest Amounts for each day in the Interest Period. All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point being rounded upwards and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards). The interest rate on the Notes will in no event be higher than the maximum rate permitted by New York law as such rate may be modified by United States law of general application.

2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the January 10 or July 10 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the Security Register; provided, however, that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3. Paying Agent, Registrar and Calculation Agent. Initially, The Bank of New York, a New York banking corporation, the Trustee under the Indenture, shall act as Paying Agent, Registrar and Calculation Agent. The Company may change any Paying Agent, Registrar or Calculation Agent without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.

4. Indenture. The Company issued the Notes under an Indenture dated January 25, 2007 (“Indenture”) among the Company, the guarantor party thereto (the “Guarantor”) and the Trustee. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

5. Optional Redemption.

The Notes shall not be redeemable at the option of the Company prior to January 24, 2008. Beginning on January 24, 2008, the Company may redeem all (but not less than all) of the Notes, after giving the notice required pursuant to Section 3.02 of the Indenture. The Notes may be redeemed at the redemption prices set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest to but excluding the redemption date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the twelve-month period commencing on January 24 of the years set forth below:

Year	Percentage
2008	106%
2009	104%
2010	102%
2011 and thereafter	100%

Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

Any notice to the Holders of Notes of a redemption pursuant to this paragraph 5 shall include the appropriate calculation of the redemption price, but need not include the redemption price itself. The actual redemption price, calculated as described above, shall be set forth in an Officers’ Certificate delivered to the Trustee no later than two Business Days prior to the redemption date.

Any prepayment pursuant to this paragraph shall be made pursuant to the provisions of Sections 3.01 through 3.04 of the Indenture.

6.Mandatory Redemption.

The Company agrees that on the dates indicated in the following table, the Company will prepay and there shall become due and payable the corresponding principal amount (or such lesser principal amount as shall then be outstanding) in respect of the aggregate principal Debt evidenced by the Notes.

Date Amount	Principal

July 24, 2009	$5,000,000
January 24, 2010	$5,000,000
July 24, 2010	$5,000,000
January 24, 2011	$5,000,000
July 24, 2011	$10,000,000

The entire remaining principal amount of the Notes shall become due and payable on January 24, 2012. Each required prepayment made pursuant to this paragraph 6 shall be made at 100% of principal amount and without payment of any premium and allocated among all of the Notes in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. Upon any repurchase of the Notes pursuant to paragraph 7, the principal amount of each required prepayment of the Notes becoming due under this paragraph 6 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase.

In the case of each prepayment of Notes pursuant to this paragraph 6, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

7. Repurchase at Option of Holder.

(a) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Company to repurchase all or any part (equal to $100,000 or an integral multiple of $100,000) of such Holder’s Notes (a “Change of Control Offer”) at a purchase price in cash equal to 102% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest on the Notes repurchased to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest to, but excluding, the Purchase Date).

(b) Upon the occurrence of a Designated Event, each Holder shall have the right to require the Company to repurchase all or any part (equal to $100,000 or an integral multiple of $100,000) of such Holder’s Notes (a “Designated Event Offer”) at a purchase price in cash equal to 110% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest on the Notes repurchased to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest to, but excluding, the Designated Event Payment Date).

(c) If the Company or one of its Subsidiaries consummates any Asset Sales, they shall not be required to apply any Net Available Cash in accordance with the Indenture until the aggregate Net Available Cash from all Asset Sales following the date the Notes are first issued exceeds $5.0 million. Thereafter, the Company shall, after application of the additional aggregate $5.0 million of Net Available Cash as provided in the second paragraph of Section 4.12 of the Indenture, commence an offer for Notes pursuant to the Indenture by applying the Net Available Cash (an “Asset Sale Offer”) pursuant to Section 3.07 of the Indenture to purchase the maximum principal amount of Notes that may be purchased out of the Net Available Cash at an offer price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date fixed for the closing of such offer in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Net Available Cash, the Company (or such Subsidiary) may use such deficiency first to repay certain credit facilities or any other Senior Debt of the Company or any Guarantor or Debt of any Subsidiary of the Company that is not a Guarantor (excluding, in any such case, any Debt owed to the Company or an Affiliate of the Company), and only thereafter, for any purpose not prohibited by the Indenture. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Net Available Cash, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes.

8. Notice of Redemption. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $100,000 may be redeemed in part but only in whole multiples of $100,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $100,000 and integral multiples of $100,000. This Note shall represent the aggregate principal amount of outstanding Notes from time to time endorsed hereon and the aggregate principal amount of Notes represented hereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes.

11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Company and the Trustee may amend or supplement the Indenture or the Notes with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing Default or Event of Default (except a continuing Default or Event of Default in the payment of principal, premium, if any, or interest on the Notes) or compliance with any provision of the Indenture or the Notes (except for certain covenants and provisions of the Indenture which cannot be amended without the consent of each Holder) may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes). Without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation, partnership or limited liability company of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes, to add additional Guarantees or additional obligors with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders of the Notes or to surrender any right or power conferred upon the Company, or to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder.

12. Defaults and Remedies. Each of the following is an Event of Default under the Indenture: (a) failure to make the payment of any interest on such Notes when the same becomes due and payable, and such failure continues for a period of 15 days; (b) failure to make the payment of any principal of, or premium, if any, on, any of such Notes when the same becomes due and payable at its Stated Maturity, upon acceleration, mandatory redemption, optional redemption, required repurchase or otherwise, including payment of Additional Amounts; (c) failure to comply with Section 5.01 of the Indenture; (d) failure to comply with any other covenant or agreement in such Notes or in this Indenture (other than a failure that is the subject of the foregoing clause (a), (b) or (c) and other than the failure to comply with Section 4.25 of the Indenture, for which payment of Additional Amounts is provided for under the Indenture and is governed by Section 4.01 thereof), and such failure continues for 30 days after written notice is given to the Company by the Trustee or the holders of not less than 25% in aggregate principal amount of such Notes then outstanding specifying the default, demanding that it be remedied and stating that such notice is a “Notice of Default;” (e) a default under any Debt by the Company or any Subsidiary that results in acceleration of the maturity of such Debt, or failure to pay any such Debt at maturity, in an aggregate amount greater than $3.0 million or its foreign currency equivalent at the time; (f) any legal proceedings in respect of, or judgment or judgments for, the payment of money in an aggregate amount in excess of $1.0 million (or its foreign currency equivalent at the time) that shall be instituted or rendered against the Company or any Subsidiary; (g) any Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Guarantee) or any Guarantor denies or disaffirms its obligations under its Guarantee; (h) certain events of bankruptcy, insolvency or reorganization affecting the Company or any of its Significant Subsidiaries; (i) any default by the Company or Future Guarantor Pledgor in any of its obligations under the Security Documents, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; the security interest under the Security Documents shall, at any time, cease to be in full force and effect for any reason other than the satisfaction in full of all obligations under the Indenture and discharge of the Indenture or any security interest created thereunder shall be declared invalid or unenforceable or the Company or any Guarantor shall assert, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable; (j) the Company or any Future Guarantor Pledgor denies or disaffirms its obligations under any Security Document or, other than in accordance with this Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Trustee ceases to have a first priority interest in the Collateral; (k) the Company, the WFOE or Dalian Fushi amends or modifies their respective constitutive documents in such a manner that would have a Material Adverse Effect or engages any business other than a Related Business; (l) either (i) any Restructuring Agreement (or all Restructuring Agreements considered as a whole), the Indenture, the Notes, any loan made directly or indirectly from the

Company to the WFOE, or any Security Document shall be (A) declared by any Governmental Authority to be illegal or enforceable or (B) terminated prior to its scheduled termination date, or (ii) any party to a Restructuring Agreement shall deny that it has any liability or obligation under any such Restructuring Agreement to which it is a party and such party shall have ceased performance thereunder prior to its scheduled expiration date; (m)(i) the confiscation, expropriation or nationalization by any Governmental Authority of any Property of the Company or any of its Subsidiaries or their respective interests in any Restructuring Agreement (or all Restructuring Agreements considered as a whole); or (ii) the cancellation, or material and substantially adverse modification, of the rights of the WFOE pursuant to the Restructuring Agreements, or (iii) if such revocation or repudiation could reasonably be expected to have a Material Adverse Effect, the revocation or repudiation by any Governmental Authority of any previously granted Governmental Approval to Dalian Fushi or the WFOE that is material to the operation of the Related Business; or (iv) the imposition or introduction of material and discriminatory taxes, tariffs, royalties, customs or excise duties imposed on Dalian Fushi or the WFOE, or the material and discriminatory withdrawal or suspension of material privileges or specifically granted material rights of a fiscal nature; (n) failure by the Company or any Affiliate thereof (other than any Person who is an Affiliate solely because such Person is a holder of Notes or Convertible Notes) to comply with any of the agreements in that certain Investor Rights Agreement dated the Issue Date by and among the Company, the WFOE, Dalian Fushi, certain Affiliates of the Company and the other Persons therein named if such failure continues for 30 days after written notice is given to the Company by the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding specifying the default, demanding that it be remedied and stating that such notice is a “Notice of Default;” or (o) failure by the Company to comply with the Escrow Agreement if such failure continues for 30 days after written notice is given to the Company by the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding specifying the default, demanding that it be remedied and stating that such notice is a “Notice of Default.”

If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency described in the Indenture, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

13. Trustee Dealings with Company. Subject to certain limitations, the Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee.

14. No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder of the Company or of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Indenture, the Notes, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability.

15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

17. Original Issue Discount. For purposes of sections 1272, 1273 and 1275 of the Internal Revenue Code of 1986, as amended, this Note is being issued with Tax Original Issue Discount and the issue date of this Note is January 25, 2007.

18. Governing Law. The Indenture, the Guarantee and this Note shall be governed by and construed in accordance with the law of the state of New York.

Option of Holder to Elect Purchase

If you want to elect to have this Note purchased by the Company pursuant to Section 4.12 or 4.17 or 4.26 of the Indenture, check the box below:

o Section 4.12 Purchase Date:_______________

o Section 4.17

o Section 4.26

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.12 or 4.17 or Section 4.26 of the Indenture, state the amount you elect to have purchased: $_____________________

Date:_______________________________ Your

Signature:________________________________

(Sign exactly as your name appears on the Note)

SIGNATURE GUARANTEE:

________________________________________

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP.

Assignment Form

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to

(Insert assignee’s social security or other tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint_________________________________________________________________

as agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

___________________________________________________________________________________

Date: ______________

Your Signature:_________________________________

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee:

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange	Amount of decrease in Principal Amount of this Global Note	Amount of increase in Principal Amount of this Global Note	Principal Amount of this Global Note following such decrease (or increase)	Signature of authorized signatory of Trustee or Note Custodian

EX-99.4 4 v063988_ex99-4.htm

[FACE OF NOTE]

THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE, BY ACQUISITION HEREOF, THE HOLDER:

(1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT;

(2) AGREES THAT IT WILL NOT WITHIN THE PERIOD SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (CURRENTLY TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY OTHER THAN WITH RESPECT TO AFFILIATES) (A) RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (I) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (II) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (III) TO A NON-U.S. PERSON OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (IV) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, OR (V) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER OR (B) ENGAGE IN HEDGING TRANSACTIONS WITH RESPECT TO THIS SECURITY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY UNLESS IN COMPLIANCE WITH THE SECURITIES ACT; AND

(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(A)(V) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

FUSHI INTERNATIONAL, INC.

3.0% GUARANTEED SENIOR SECURED CONVERTIBLE NOTES DUE 2012

ISIN: XS0280736314

Common Code: 028073631

No. 1 $20,000,000

FUSHI INTERNATIONAL, INC., a corporation duly organized and validly existing under the laws of the State of Nevada (herein called the “Company”, which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to The Bank of New York, a New York banking corporation, or its registered assigns at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, (i) the Repurchase Amount as set forth on Schedule I hereto on January 24, 2012, (ii) interest, semi-annually on January 24 and July 24 of each year, commencing July 24, 2007 on the outstanding principal sum of the Note at said office or agency, in like coin or currency, at the rate per annum of 3.0%, from and including January 25, 2007 or from the most recent Interest Payment Date to which interest has been paid or duly provided for to, but excluding the following Interest Payment Date, (iii) Additional Interest of 3.0% per annum if no Qualifying IPO has occurred on or before July 24, 2008 such interest accruing from and including such date (or, if Interest has been paid since such date, from and including the most recent interest payment date thereafter) to but excluding each date of payment thereof, (iv) Additional Amounts upon the occurrence of any events, in the amounts and at the times specified in the definition of “Additional Amounts” in Section 1.01 of the Indenture, and (v) interest on overdue principal and (to the extent that payment of such interest is enforceable under applicable law) interest at the rate borne by the Notes, including Additional Interest, if any, at the rate of 5% per annum.

Except as otherwise provided in the Indenture, the interest payable on the Note pursuant to the Indenture on any January 24 or July 24 will be paid to the Person entitled thereto as it appears in the Security Register at the close of business on the record date, which shall be the January 10 or July 10 (whether or not a Business Day) next preceding such January 24 or July 24, as provided in the Indenture; provided that any such interest not punctually paid or duly provided for shall be payable as provided in the Indenture. The Company shall pay interest (i) on any Notes in certificated form by check mailed to the address of the Person entitled thereto as it appears in the Security Register (provided that the holder of Notes with an aggregate principal amount in excess of $1,000,000 shall, at the written election of such holder, be paid by wire transfer of immediately available funds) or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Common Depositary or its nominee.

Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions giving the holder of this Note the right to convert this Note into Common Stock of the Company on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall be governed by and construed in accordance with the laws of the State of New York.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

FUSHI INTERNATIONAL, INC.

By: __________________

Name:

Title:

Attest:

By: __________________

Name:

Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Notes described in the within-named Indenture.

THE BANK OF NEW YORK,

a New York banking corporation,

as Trustee

By: ________________________

Authorized Signatory

By: ________________________

As Authenticating Agent

(if different from Trustee)

By: ________________________

Authorized Signatory

NOTATION OF GUARANTEE

For value received, each Guarantor (which term includes any successor Person under the Indenture), jointly and severally, unconditionally guarantees, to the extent set forth in the Indenture and subject to the provisions in the Indenture, dated January 25, 2007 (the “Indenture”), among Fushi International, Inc., as issuer (the “Company”), the Guarantors listed on the signature pages thereto and The Bank of New York, a New York banking corporation, as trustee (the “Trustee”), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes, whether at maturity, by acceleration, redemption, repurchase or otherwise, the due and punctual payment of interest on overdue principal and premium, if any, and, to the extent permitted by law, interest and the due and punctual performance of all other obligations of the Company to the holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 9 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. This Guarantee is subject to release as and to the extent set forth in Section 9.05 of the Indenture. Each holder of a Note, by accepting the same agrees to and shall be bound by such provisions. Capitalized terms used herein and not defined are used herein as so defined in the Indenture.

FUSHI HOLDINGS, INC.

By:__________________________

Name:

Title:

(REVERSE OF NOTE)

FUSHI INTERNATIONAL, INC.

3.0% GUARANTEED SENIOR SECURED CONVERTIBLE NOTE DUE 2012

This Note is one of a duly authorized issue of Notes of the Company, designated as its 3.0% Guaranteed Senior Secured Convertible Notes due 2012 (herein called the “Notes”), in an initial aggregate principal amount of $20,000,000, issued and to be issued under and pursuant to an Indenture dated January 25, 2007 (herein called the “Indenture”), between the Company and The Bank of New York, a New York banking corporation, as trustee (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes.

In case an Event of Default shall have occurred and be continuing, the principal of and accrued and unpaid Interest on all Notes may be declared by either the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of a majority in aggregate principal amount of the Notes at the time outstanding, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Notes; provided that no such supplemental indenture shall (i) extend the fixed maturity of any Note, (ii) reduce the rate or extend the time of payment of Interest thereon, (iii) reduce the principal amount thereof or reduce any amount payable upon redemption or repurchase thereof, (iv) change the obligation of the Company to repurchase any Note at the option of a Noteholder on a Repurchase Date in a manner adverse to the holders of Notes, (v) change the obligation of the Company to repurchase any Note upon the happening of a Designated Event in a manner adverse to the holders of Notes, (vi) impair the right of any Noteholder to institute suit for the payment thereof, (vii) make the principal thereof or interest thereon payable in any coin or currency other than that provided in the Notes, (viii) impair the right to convert the Notes into Common Stock or reduce the number of shares of Common Stock or any other property receivable by a Noteholder upon conversion subject to the terms set forth in the Indenture, including Section 14.05 thereof, in each case, without the consent of the holder of each Note so affected, (ix) modify any of the provisions of Section 8.02 or Section 6.07 thereof, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Note so affected, (x) change any obligation of the Company to maintain an office or agency in the places and for the purposes set forth in Section 4.02 thereof, (xi) reduce the quorum or voting requirements set forth in Article 13, (xii) subordinate the Notes or any Guarantee to any other obligation of the Company or the applicable Guarantor, (xiii) release the security interest granted in favor of the holders of the Notes in the Collateral other than pursuant to the terms of the Security Documents, (xiv) release any other security interest that may have

been granted in favor of the holders of the Notes other than pursuant to the terms of such security interest, (xv) reduce the amount payable as Additional Amounts, (xvi) reduce the premium payable upon a Change of Control or, at any time after a Change of Control has occurred, change the time at which the Change of Control Offer relating thereto must be made or at which the Notes must be repurchased pursuant to such Change of Control Offer, (xvii) at any time after the Company is obligated to make an Asset Sale Offer with the Excess Proceeds from Asset Sales, change the time at which such Asset Sale Offer must be made or at which the Notes must be repurchased pursuant thereto, (xviii) make any change in any Guarantee that would adversely affect the holders or (xix) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all Notes then outstanding. Subject to the provisions of the Indenture, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the holders of all of the Notes waive any past Default or Event of Default under the Indenture and its consequences except (A) a default in the payment of Interest on, or the principal of, any of the Notes, (B) a failure by the Company to convert any Notes into Common Stock of the Company, (C) a default in the payment of the purchase price pursuant to Section 3.02 of the Indenture, (D) a default in the payment of the repurchase price pursuant to Section 3.03 of the Indenture, or (E) a default in respect of a covenant or provisions of the Indenture which under Article 10 of the Indenture cannot be modified or amended without the consent of the holders of each or all Notes then outstanding or affected thereby. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Note or such other Notes.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and Interest on this Note at the place, at the respective times, at the rate and in the coin or currency herein prescribed.

Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.

The Notes are issuable in fully registered form, without coupons, in denominations of $100,000 principal amount and any multiple of $100,000. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of any other authorized denominations.

The Notes are not subject to redemption through the operation of any sinking fund.

If a Designated Event occurs at any time prior to maturity of the Notes, the Company shall become obligated to purchase, at the option of the holder, all or any portion of the Notes held by such holder, on a date specified by the Company that is thirty (30) days after notice thereof at a cash “Repurchase Amount” of the Redemption Price plus any accrued and unpaid Interest on such Note (including post-petition interest in any proceeding under any Bankruptcy Law) and interest accrued on overdue principal (and, to the extent lawful, on overdue installments of interest) and premium, if any, at a rate that is 5% per annum in excess of the rate of Interest then in effect, where “Redemption Price” means the amount calculated in accordance with the following formula, rounded (if necessary) to two decimal places with 0.005 being rounded upwards:

Redemption Price = I x (1 + r/2)^d/180

Where:
I	=	Issue price (100% of principal amount) of the Notes;
r	=	15.0% expressed as a decimal; and
d	=	number of days from and including the Issue Date to but excluding, the date for redemption or repurchase, calculated on the basis of a 360-day year consisting of 12 months of 30 days each, and in the case of an incomplete month, the actual number of days elapsed.

provided that if the repurchase date falls after a record date and on or prior the corresponding interest payment date, then accrued and unpaid Interest to, but excluding, the Designated Event Repurchase Date shall be paid on such interest payment date to the holders of record of such Notes on the applicable record date instead of to the holders surrendering such Notes for repurchase on such date. The Notes will be subject to repurchase in multiples of $100,000 principal amount. The Company shall mail to all holders of record of the Notes a notice of the occurrence of a Designated Event and of the repurchase right arising as a result thereof on or before the 15th day after the occurrence of such Designated Event. To exercise such right, a holder shall deliver to the Company such Note with the form entitled “Designated Event Repurchase Notice” on the reverse thereof duly completed, together with the Note, duly endorsed for transfer, at any time prior to the close of business on the Business Day immediately preceding the Designated Event Repurchase Date, and shall deliver the Notes to the Trustee (or other paying agent appointed by the Company) as set forth in the Indenture.

Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the holder, all or any portion of the Notes held by such holder on January 24, 2010 in whole multiples of $100,000 at the cash Repurchase Amount. To exercise such right, a holder shall deliver to the Company such Note with the form entitled “Repurchase Notice” on the reverse thereof duly completed, together with the Note, duly endorsed for transfer, at any time from the opening of business on the date that is 20 Business Days prior to such Repurchase Date until the close of business on the date that is two Business Days prior to the Repurchase Date, and shall deliver the Notes to the Trustee (or other paying agent appointed by the Company) as set forth in the Indenture.

Holders have the right to withdraw any Designated Event Repurchase Notice or the Repurchase Notice, as the case may be, by delivering to the Trustee (or other paying agent appointed by the Company) a written notice of withdrawal up to the close of business on the Business Day immediately preceding the Designated Event Repurchase Date or the Repurchase Date, as the case may be, all as provided in the Indenture.

If money or cash, sufficient to pay the repurchase price of all Notes or portions thereof to be purchased as of the Designated Event Repurchase Date or the Repurchase Date, as the case may be, is deposited with the Trustee (or other paying agent appointed by the Company), on the Designated Event Repurchase Date or the Repurchase Date, as the case may be, interest will cease to accrue on such Notes (or portions thereof) immediately after such Repurchase Date, and the holder thereof shall have no other rights as such other than the right to receive the repurchase price upon surrender of such Note.

Subject to the occurrence of certain events and in compliance with the provisions of the Indenture, prior to the final maturity date of the Notes, the holder hereof has the right, at its option, to convert each $100,000 principal amount of the Notes into 14,285 shares of the Company’s Common Stock (a conversion price of approximately $7.00 per share), as such shares shall be constituted at the date of conversion and subject to adjustment from time to time as provided in the Indenture, upon surrender of this Note with the form entitled “Conversion Notice” on the reverse thereof duly completed, to the Company at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, or at the option of such holder, the Corporate Trust Office, and, unless the shares issuable on conversion are to be issued in the same name as this Note, duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the holder or by his duly authorized attorney. The Company will notify the holder thereof in writing of any event triggering the right to convert the Notes as specified above in accordance with the Indenture.

No adjustment in respect of interest on any Note converted or dividends on any shares issued upon conversion of such Note will be made upon any conversion except as set forth in the next sentence. If this Note (or portion hereof) is surrendered for conversion during the period from the close of business on any record date for the payment of interest to the close of business on the Business Day preceding the following interest payment date, this Note (or portion hereof being converted) must be accompanied by payment, in immediately available funds or other funds acceptable to the Company, of an amount equal to the interest otherwise payable on such interest payment date on the principal amount being converted; provided that no such payment shall be required (1) if the Company has specified a redemption date that is after a record date and prior to the next interest payment date, (2) if the Company has specified a Designated Event Repurchase Date that is during such period or (3) to the extent of any overdue Interest, if any overdue interest exists at the time of conversion with respect to such Note.

No fractional shares will be issued upon any conversion, but an adjustment and payment in cash will be made, as provided in the Indenture, in respect of any fraction of a share which would otherwise be issuable upon the surrender of any Note or Notes for conversion.

If there is a Change of Control, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes in cash at the Repurchase Amount. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled “Option of Holder to Elect Purchase” appearing below.

A Note in respect of which a holder is exercising its right to require repurchase upon a Change of Control, Designated Event or repurchase on a Repurchase Date may be converted only if such holder withdraws its election to exercise either such right in accordance with the terms of the Indenture.

Upon due presentment for registration of transfer of this Note at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof, subject to the limitations provided in the Indenture, without charge except for any tax, assessment or other governmental charge imposed in connection therewith.

The Company, the Trustee, any authenticating agent, any paying agent, any conversion agent and any Security Registrar may deem and treat the registered holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Company or any Security Registrar) for the purpose of receiving payment hereof, or on account hereof, for the conversion hereof and for all other purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any paying agent nor other conversion agent nor any Security Registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered holder shall, to the extent of the sum or sums paid, satisfy and discharge liability for monies payable on this Note.

No recourse for the payment of the principal of or Interest on this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any supplemental indenture or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, shareholder, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

For purposes of sections 1272, 1273 and 1275 of the Internal Revenue Code of 1986, as amended, this Note is being issued with Tax Original Issue Discount and the issue date of this Note is January 25, 2007.

This Note shall be governed by and construed in accordance with the laws of New York.

Terms used in this Note and defined in the Indenture are used herein as therein defined.

ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM	-	as tenants in common	UNIF GIFT MIN ACT	-	Custodian
TEN ENT	-	as tenant by the entireties	(Cust) (Minor)
JT TEN	-	as joint tenants with right of survivorship under Uniform Gifts to Minors Act and not as tenants in common

__________________________________

(State)

Additional abbreviations may also be used though not in the above list.

CONVERSION NOTICE

TO: FUSHI INTERNATIONAL, INC.

The undersigned registered owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion thereof (which is $100,000 or a multiple thereof) below designated, into shares of Common Stock of Fushi International, Inc. in accordance with the terms of the Indenture referred to in this Note, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. If shares or any portion of this Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will provide the appropriate information below and pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest, including additional interest, if any, accompanies this Note.

Dated:

Signature(s)

Signature(s) must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP.


Fill in the registration of shares of Common Stock if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:

__________________________

(Name)

__________________________

(Street Address)

__________________________

(City, State and Zip Code)

__________________________

Please print name and address

Principal amount to be converted

(if less than all):

$_________________________

Social Security or Other Taxpayer

Identification Number:

__________________________

REPURCHASE NOTICE

TO: FUSHI INTERNATIONAL, INC.

The undersigned registered owner of this Note hereby requests and instructs Fushi International, Inc. (the “Company”) to repurchase the entire principal amount of this Note, or the portion thereof (which is $100,000 or an integral multiple thereof) below designated, in accordance with the terms of the Notes and the Indenture at a price equal to the Repurchase Amount, to the registered holder hereof. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. The Notes shall be repurchased by the Company as of the Repurchase Date pursuant to the terms and conditions specified in the Indenture.

$ ___________ principal amount of the Notes to which this Repurchase Notice relates (if less than entire principal amount)

Dated:

Signature(s):

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Note Certificate Number (if applicable):

Principal amount to be repurchased (if less than all):

Social Security or Other Taxpayer Identification Number:

PURCHASE NOTICE

TO: FUSHI INTERNATIONAL, INC.

The undersigned registered owner of this Note hereby irrevocably acknowledges receipt of a notice from Fushi International, Inc. (the “Company”) regarding the right of holders to elect to require the Company to repurchase the Notes upon the occurrence of either an Asset Sale Offer, a Change of Control Offer or a Designated Event Offer and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is $100,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indentureat the price of:-

(i)

100% of the principal amount thereof, together with accrued and unpaid Interest thereon (including post-petition interest in any proceeding under any Bankruptcy Law), interest accrued on overdue principal (and, to the extent lawful, on overdue installments of interest) and premium, if any, at a rate that is 5% per annum in excess of the rate of Interest then in effect to but excluding the Purchase Date, in the case of an Asset Sale Offer, and

(ii)

the Repurchase Amount, to the registered holder hereof, in case of a Change of Control Offer or Designated Event Offer.

Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. The Notes shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in the Indenture.

$_______________ principal amount of the Notes to which this Purchase Notice relates (if less than entire principal amount) pursuant to 4.12, 4.17 or 4.26 of the Indenture, check the box below:

o Section 4.12 Purchase Date:_______________

o Section 4.17

o Section 4.26

Dated:

Signature(s):

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Note Certificate Number (if applicable):

Principal amount to be repurchased (if less than all):

Social Security or Other Taxpayer Identification Number:

Assignment Form

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to

(Insert assignee’s social security or other tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint______________________________________________________________

as agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

______________________________________________________________________

Date: ______________

Your Signature:_________________________

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee:

Schedule I

FUSHI INTERNATIONAL, INC.

3.0% Guaranteed Senior Secured Convertible Notes due 2012

No. 1

The original Principal Amount of this Note is TWENTY MILLION DOLLARS ($20,000,000). The Company will pay the Repurchase Amount as defined below.

“Repurchase Amount” means, with respect to any Note, the Redemption Price plus any accrued and unpaid Interest on such Note (including post-petition interest in any proceeding under any Bankruptcy Law) and interest accrued on overdue principal (and, to the extent lawful, on overdue installments of interest) and premium, if any, at a rate that is 5% per annum in excess of the rate of Interest then in effect.

“Redemption Price” means the amount calculated in accordance with the following formula, rounded (if necessary) to two decimal places with 0.005 being rounded upwards:

Redemption Price = I x (1 + r/2)^d/180
Where:
I	=	Issue price (100% of Principal Amount) of the Notes;
r	=	15.0% expressed as a decimal; and
d	=	number of days from and including the Issue Date to but excluding, the date for redemption, calculated on the basis of a 360-day year consisting of 12 months of 30 days each, and in the case of an incomplete month, the actual number of days elapsed.

For purposes thereof, the Principal Amount has been adjusted in accordance with the terms of the Indenture as set forth below:

Date

Principal Amount

Notation Explaining Principal

Amount Recorded

Authorized Signature of Trustee or Custodian