<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
AXSYS Technologies, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
054615 10 9
(CUSIP Number)
Mr. John W. Gildea
115 East Putnam Avenue, Greenwich, Connecticut 06830
(203) 661-6945
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 21, 1997
(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 which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) 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 disclosure
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).
Page 1 of 19 Pages
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CUSIP No. 054615 10 9
- --------------------------------------------------------------------------------
1 Name of Reporting Person(1)
S.S. or I.R.S. Identification No. of Above Person
John W. Gildea
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |_|
b. |x|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF; PF
- --------------------------------------------------------------------------------
5 Check If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
U.S.A.
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 154,500
Beneficially
Owned By
Each 8 Shared Voting Power
Reporting
Person 0
With
9 Sole Dispositive Power
154,500
10 Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
154,500
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
5.17%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- --------------------------------------------------------------------------------
- --------
1 Filing jointly pursuant to Rule 13d-1(f)(1) under the
Securities Exchange Act of 1934, as amended, with Network Fund
III, Ltd.
Page 2 of 19 Pages
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CUSIP No. 054615 10 9
- --------------------------------------------------------------------------------
1 Name of Reporting Person2
S.S. or I.R.S. Identification No. of Above Person
Network Fund III, Ltd.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |_|
b. |x|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
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
Number of
Shares 139,500
Beneficially
Owned By
Each 8 Shared Voting Power
Reporting
Person 0
With
9 Sole Dispositive Power
139,500
10 Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
139,500
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
4.67%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
CO
- --------------------------------------------------------------------------------
- --------
2 Filing jointly pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act
of 1934, as amended, with John W. Gildea.
Page 3 of 19 Pages
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Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Schedule 13D") relates to
the Common Stock, par value $.01 per share (the "Common
Stock"), of AXSYS Technologies, Inc., a Delaware corporation
(the "Company"). The address of the principal executive
offices of the Company is 645 Madison Avenue, New York, New
York 10022.
Item 2. Identity and Background.
This Schedule 13D is filed jointly on behalf of John W.
Gildea, a United States citizen ("Gildea"), and Network Fund
III, Ltd., a Cayman Islands exempt company ("Network Fund
III"), pursuant to Rule 13d-1(f)(1) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Gildea is the Chairman of the Board of Directors, Chief
Executive Officer, President, a director and sole stockholder
of Gildea Management Company, a Delaware corporation ("GMC"),
which corporation has the power to dispose of the 139,500
shares of Common Stock (the "Network Shares") beneficially
owned by Network Fund III, by virtue of an Investment Advisory
Agreement, dated February 26, 1996, between GMC and Network
Fund III (the "Investment Advisory Agreement"), a copy of
which is attached hereto as Exhibit 2 and incorporated herein
by reference. Gildea also owns 15,000 shares of Common Stock
in his individual capacity (the "Gildea Shares").
Mr. William P. O'Donnell ("O'Donnell") is an officer and
director of GMC and owns 1,500 shares of Common Stock (the
"O'Donnell Shares"). Gildea and Network Fund III disclaim any
existence of a group (within the meaning of Section 13(d) of
the Exchange Act) with, between or among each other, Mr.
O'Donnell or any other person or entity.
Gildea's principal business is managing the investments of
various entities in issuers located principally in the United
States. Network Fund III's principal business is to invest in
debt and equity securities of public and private companies.
The principal business address and the principal office
address of Gildea is 115 East Putnam Avenue, Greenwich,
Connecticut 06830. The principal address and the principal
office address of Network Fund III is P.O. Box 219 Butterfield
House, Grand Cayman, Cayman Islands, B.W.I.
The respective names, business addresses, citizenship and
present principal occupations of each director and executive
officer of Network Fund III are set forth on Schedule I
hereto.
None of Gildea, Network Fund III or, to the best knowledge of
such parties, any of the persons listed on Schedule I hereto,
has, during the last five years, (i) been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and
as a result of such proceeding 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 any violation with respect
to such laws.
Page 4 of 19 Pages
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Item 3. Source and Amount of Funds or Other Consideration.
Gildea acquired the 15,000 Gildea Shares through the exchange
of 20,000 shares of $1.20 Cumulative Exchangeable Redeemable
Preferred Stock ("AXSYS Preferred Stock") purchased by Gildea
on February 28, 1997 for $8.94 per share of AXSYS Preferred
Stock, or an aggregate of $178,750, which funds were obtained
from Gildea's personal funds, and which shares were exchanged
on March 17, 1997 pursuant to an Offer to Exchange by the
Company at a rate of .75 shares of Common Stock of the Company
for each outstanding share of AXSYS Preferred Stock (the
"Exchange Offer").
Network Fund III acquired 127,500 of the 139,500 Network
Shares through the exchange of 170,000 shares of AXSYS
Preferred Stock purchased by Network Fund III on February 28,
1997 for $8.94 per share of AXSYS Preferred Stock, or an
aggregate of $1,519,375, all of which funds were obtained from
the working capital of Network Fund III, and which shares were
exchanged on March 17, 1997 pursuant to the Exchange Offer.
Network Fund III acquired 12,000 of the 139,500 Network Shares
in an open market purchase on April 21, 1997 for $12.38 per
share of Common Stock, or an aggregate of $148,500, all of
which funds were obtained from the working capital of Network
Fund III, in an open market purchase.
O'Donnell acquired the 1,500 O'Donnell Shares through the
exchange of 2,000 shares of AXSYS Preferred Stock purchased by
O'Donnell on February 28, 1997 for $8.94 per share of AXSYS
Preferred Stock, or an aggregate of $17,875, which funds were
obtained from O'Donnell's personal funds, and which shares
were exchanged on March 17, 1997 pursuant to the Exchange
Offer.
Item 4. Purpose of Transaction.
Gildea acquired the Gildea Shares, Network Fund III acquired
127,500 of the Network Shares and O'Donnell acquired the
O'Donnell Shares pursuant to the Exchange Offer and Network
Fund III acquired 12,000 of the Network Shares, in a separate
open market transaction. Each of Gildea, Network Fund III and
O'Donnell currently intends to hold the Gildea Shares, the
Network Shares and the O'Donnell Shares, respectively, for
investment.
Each of Gildea, Network Fund III and O'Donnell intend to
review on a continuing basis their investment in the Company.
As of the date of this Schedule 13D, no determination has been
made by Gildea, Network Fund III or O'Donnell to acquire
additional shares of capital stock of the Company or to
dispose of any shares of capital stock of the Company now held
by them, although any of them may decide to so acquire or
dispose of shares of capital stock of the Company. Any such
determination will depend on market conditions prevailing from
time to time and on other conditions which may be applicable
depending on the nature of the transaction or transactions
involved. Except as specifically set forth in this Item 4,
none of Network Fund III, Gildea or O'Donnell has any plans or
proposals which relate to or would result in any of the
actions or effects set forth in items (a) through (j) of Item
4 of Schedule 13D, although any of such persons may develop
such plans or proposals. Gildea and Network Fund III disclaim
any existence of a group (within the meaning of Section 13(d)
of the Exchange Act) with, between or among each other, Mr.
O'Donnell or any other person or entity.
Page 5 of 19 Pages
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Item 5. Interest in Securities of the Issuer.
(a) (i) The 139,500 Network Shares and the 15,000 Gildea
Shares beneficially owned by Gildea represent 5.17%
of the 2,986,381 shares of Common Stock of the
Company outstanding on the date hereof, based upon
information provided by the Company and calculated in
accordance with Rule 13d-3(d)(1) under the Exchange
Act.
(ii) The 1,500 O'Donnell Shares represent .05% of the
2,986,381 of Common Stock of the Company outstanding
on the date hereof, based upon information provided
by the Company and calculated in accordance with Rule
13d-3(d)(1) under the Exchange Act.
(iii) The 139,500 Network Shares represent 4.67% of the
2,986,381 Shares of Common Stock of the Company
outstanding on the date hereof, based upon
information provided by the Company and calculated in
accordance with Rule 13d-3(d)(1) under the Exchange
Act.
(b) (i) Gildea, as the Chairman of the Board of
Directors, Chief Executive Officer, President and
sole stockholder of GMC, may be deemed to have the
power to vote or direct the voting and to dispose or
direct the disposition of the Network Shares.
(ii) Gildea has the sole power to vote or direct the
voting of and to dispose of or direct the disposition
of the Gildea Shares.
(iii) O'Donnell has the sole power to vote or direct the
voting of and to dispose of or direct the disposition
of the O'Donnell Shares.
(c) Except as set forth in this Schedule 13D none of Gildea,
Network Fund III, O'Donnell, or, to the best knowledge of such
parties, any of the persons named on Schedule I hereto, owns
any shares of the capital stock of the Company or has
purchased or sold any shares of the capital stock of the
Company during the past 60 days.
(d) Except as set forth in this Schedule 13D, no person is known
by Gildea or Network Fund III to have the right to receive or
the power to direct the receipt of dividends from, or the
proceeds from the sale of the Gildea Shares or the Network
Shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as set forth in this Schedule 13D, there are no
contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons referred to in Item 2
of this Schedule 13D or between such persons and any other
person with respect to any of the securities of the Company,
including, but not limited to, any relating to the transfer or
voting of any of such securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss or the
giving withholding of proxies.
Page 6 of 19 Pages
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Item 7. Materials to Be Filed as Exhibits.
1. Joint Filing Agreement, dated April 30, 1997.
2. Investment Advisory Agreement dated as of
February 26, 1996, by and between Gildea Management
Company and Network Fund III, Ltd.
Page 7 of 19 Pages
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SIGNATURE
After reasonable inquiry and to the best of their respective knowledge
and belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: April 30, 1997
By: /s/ John W. Gildea
---------------------------------
John W. Gildea
NETWORK FUND III, LTD.
By: GILDEA MANAGEMENT COMPANY,
Investment Advisor
By: /s/ John W. Gildea
----------------------------------
Name: John W. Gildea
Title: President
Page 8 of 19 Pages
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SCHEDULE I
Reporting Person: Network Fund III, Ltd.
P.O. Box 219, Butterfield House
Grand Cayman, Cayman Islands, B.W.I.
Executive Officers, Directors and Controlling Person:
Name: ....................... John W. Gildea
Position:....................... Director and Chairman
Principal Occupation
and Employment;
Business Address:............... President, director and sole stockholder of
GMC; the business address of GMC and Mr.
Gildea is: 115 Putnam Avenue, Greenwich, CT
06830.
Name: ....................... William P. O'Donnell
Position:....................... Director and Managing Director
Principal Occupation
and Employment:................. Executive officer and director of GMC
Business Address: 115 Putnam Avenue
Greenwich, CT 06830
Citizenship:.................... USA
Name: ....................... Peter Arthur Neil Bailey
Position: Director
Principal Occupation
and Employment;
Business Address:............... Director of Abacus Asset Management in
Jersey, Channel Islands, a member of Coopers
& Lybrand International, a limited liability
association incorporated in Switzerland;
business address: La Motte Chambers, La
Motte Street, St. Heiler, Jersey, Channel
Islands, U.K. JE1 1BJ
Citizenship:.................... U.K.
Name: ....................... Geoffrey William Fisher
Position:....................... Director
Principal Occupation
and Employment;
Business Address:............... Director of Abacus Asset Management in
Jersey, Channel Islands, a member of Coopers
& Lybrand International, a limited liability
association incorporated in Switzerland;
business address: La Motte Chambers, La
Motte Street, St. Heiler, Jersey, Channel
Islands, U.K. JE1 1BJ
Citizenship:.................... U.K.
Page 9 of 19 Pages
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Name: ....................... Michael David de Figueiredo
Position:....................... Director
Principal Occupation
and Employment;
Business Address:............... Director of Abacus (CI) Limited, a member of
Coopers & Lybrand International, a limited
liability association incorporated in
Switzerland; business address: La Motte
Chambers, La Motte Street, St. Heiler,
Jersey, Channel Islands, U.K. JE1 1BJ
Citizenship:.................... U.K.
Page 10 of 19 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
Exhibit Number
<S> <C>
1. Joint Filing Agreement, dated April 30, 1997. 13
2. Investment Advisory Agreement dated as of
February 26, 1996, by and between Gildea Management
Company and Network Fund III, Ltd. 15
</TABLE>
Page 11 of 19 Pages
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EXHIBIT 1
Page 12 of 19 Pages
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Exhibit 1
AGREEMENT
The undersigned hereby agree that this statement on Schedule
13D with respect to the beneficial ownership of shares of Common Stock of AXSYS
Technologies, Inc. is filed jointly, on behalf of each of them.
Dated: April 30, 1997
By: /s/ John W. Gildea
---------------------------------------
John W. Gildea
NETWORK FUND III, LTD.
By: GILDEA MANAGEMENT COMPANY,
Investment Advisor
By: /s/ John W. Gildea
-------------------------------
Name: John W. Gildea
Title: President
Page 13 of 19 Pages
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EXHIBIT 2
Page 14 of 19 Pages
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NETWORK FUND III, LTD.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is entered into as
of February 26, 1996 by and between GILDEA MANAGEMENT COMPANY, a Delaware
corporation (the "Investment Advisor"), and NETWORK FUND III, LTD., a Cayman
Islands exempted company (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund has been formed as a closed-end investment company,
the objective of which is to achieve capital appreciation in accordance with the
investment objectives and strategies as more fully described in the Confidential
Private Placement Memorandum of the Fund dated February 1996 (the "Memorandum");
and
WHEREAS, the Fund wishes to engage the Investment Advisor to provide
investment advisory services with respect to the Fund's assets; and
WHEREAS, the Investment Advisor wishes to accept the same upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained, the parties agree as follows:
1. Investment Management Services. In accordance with the provisions of
the Memorandum and Articles of Association of the Fund, and under the ultimate
supervision of the Board of Directors of the Fund (the "Directors") from time to
time as provided therein, and in accordance with the investment objectives,
policies, guidelines and restrictions which are set forth in the Memorandum or
which are otherwise communicated to the Investment Advisor in writing by the
Fund, the Investment Advisor shall use its reasonable efforts to invest the
assets of the Fund according to the strategy set forth in the Memorandum.
Capitalized terms not otherwise defined herein shall be used herein as defined
in the Memorandum.
2. Authority of the Investment Advisor. The Investment Advisor shall
have full discretion and authority, without obtaining the Fund's prior approval,
to manage the investment and reinvestment of the assets of the Fund in such
manner as the Investment Advisor considers appropriate consistent with the
Memorandum. In furtherance of the foregoing, the Fund hereby designates and
appoints the Investment Advisor as its agent and attorney-in-fact, with full
power and authority and without the need for further approval of the Fund
(except as may be required by law), to carry out the following with respect to
the assets of the Fund:
(a) to effect purchases and sales (including short sales) of
(i) securities of any type whatsoever, denominated in any currency, whether or
not issued by government entities, partnerships, trusts or corporations, (ii)
any put or call options thereon (including the writing of options, whether
covered or uncovered), and (iii) other securities and instruments consistent
with the Fund's investment policies and program;
(b) to make all decisions relating to the manner, method and
timing of investment transactions, and to select brokers and dealers for the
execution, clearance and settlement of any transactions;
Page 15 of 19 Pages
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(c) to borrow from banks, brokers or other financial
institutions to the extent permitted by the Memorandum and to pledge assets of
the Fund in connection therewith;
(d) to direct custodians to deliver funds or securities for
the purpose of effecting transactions, and to instruct custodians to exercise or
abstain from exercising any privilege or right attaching to such assets; and
(e) to make and execute, in the name and on behalf of the
Fund, all such documents (including, without limitation, customer agreements and
other documents in connection with the establishment and maintenance of
brokerage accounts) and to take all such other actions as the Investment Advisor
considers necessary or advisable to carry out its investment management duties
hereunder.
3. Brokerage. In the course of selecting brokers, dealers, banks and
intermediaries to effect transactions for the Fund, the Investment Advisor may
agree to such commissions, fees and other charges on behalf of the Fund as the
Investment Advisor shall deem reasonable in the circumstances taking into
account all such factors as it deems relevant, including the quality of research
and other services made available to it (even if such services are not for the
exclusive benefit of the Fund). It is understood that the costs of such services
will not necessarily represent the lowest costs available and that the
Investment Advisor is under no obligation to combine or arrange orders so as to
obtain reduced charges.
4. Investments for the Accounts of Others and Allocation of
Opportunities.
(a) It is understood that the Investment Advisor and its
directors, officers, employees and principals may from time to time purchase and
sell securities or other investment assets for their own accounts, for the
accounts of their families, for the account of any entity in which they have a
beneficial interest or for the accounts of others for whom they may provide
investment advisory or other services (collectively, "Managed Accounts"),
notwithstanding the fact that the Fund may have or may take an investment
position in the same security; provided, however, that the Investment Advisor
shall not cause the Fund to purchase any asset from or sell any asset to the
Investment Advisor, or any of its directors, officers, employees or principals
or any account or entity controlled by such persons without the consent of the
Fund.
(b) It is understood that when the Investment Advisor
determines that it would be appropriate for the Fund and one or more Managed
Accounts to participate in an investment opportunity, the Investment Advisor
will seek to execute orders for the Fund and for such Managed Accounts on an
equitable basis. In such situations, the Investment Advisor may place orders for
the Fund and each Managed Account simultaneously, and if all such orders are not
filled at the same price, the Investment Advisor may cause the Fund and each
Managed Account to pay or receive the average of the prices at which the orders
were filled for the Fund and all Managed Accounts. If all such orders cannot be
fully executed under prevailing market conditions, the Investment Advisor may
allocate the securities traded among the Fund and the Managed Accounts in a
manner which it considers equitable, taking into account the size of the order
placed for the Fund and each such Managed Account as well as any other factors
which it deems relevant.
(c) The Investment Advisor will not organize any other
investment fund with the same objectives as the Fund (other than a parallel U.S.
limited partnership for U.S. investors) unless at least sixty percent (60%) of
the capital of the Fund has been invested in portfolio securities consistent
with the Fund's objectives.
Page 16 of 19 Pages
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5. Compensation.
(a) For its services hereunder, the Investment Advisor shall
be entitled to receive a quarterly management fee from the Fund at an annual
rate equal to 1.75% of the Net Value of the Fund (as defined in the Memorandum).
The management fee shall be calculated and payable in arrears after the end of
each calendar quarter based on the Net Value of the Fund as of the end of the
calendar quarter. The management fee shall be paid promptly to the Investment
Advisor after the close of each calendar quarter.
(b) In addition to the management fee, once the Fund has made
aggregate distributions to holders of its Common Shares equal to their initial
investment plus a 7% non-compounded annual return (the "Preferred Return"), then
the Investment Advisor will receive distributions in its capacity as holder of
the Fund's Founders Shares until it has received cumulative distributions equal
to a 1.75% non-compounded annual return on the Fund's capital, and thereafter
distributions will be made 80% to holders of Common Shares of the Fund and 20%
to the Investment Advisor in its capacity as holder of Founders Shares, in each
case as provided in the Memorandum and in the Articles and Memorandum of
Association of the Fund.
6. Scope of Liabilities. The Investment Advisor shall not be liable to
the Fund, its affiliates or shareholders for any losses, damages, expenses or
claims occasioned by any act or omission of the Investment Advisor in connection
with the performance of its services hereunder, other than as a result of its
own willful misconduct, gross negligence or reckless disregard of its duties
hereunder, or as otherwise required by applicable law.
7. Indemnification. The Fund shall indemnify the Investment Advisor
(which shall include solely for purposes of this Section 9 any of its directors,
officers, employees and shareholders) against and hold them harmless from any
expense, loss, liability or damage arising out of any claim asserted or
threatened to be asserted by any third party, in connection with the Investment
Advisor's serving or having served as such pursuant to this Agreement; provided,
however, that the Investment Advisor shall not be entitled to indemnification
with respect to any expense, loss, liability or damage which was caused by its
own gross negligence, willful misconduct or reckless disregard of its duties
hereunder. The Fund shall advance to the Investment Advisor the reasonable costs
and expenses of investigating and/or defending any such claim, subject to
receiving a written undertaking from the Investment Advisor to repay any such
amounts advanced to it in the event and to the extent of any subsequent
determination that the Investment Advisor was not entitled to indemnification
hereunder. In the event that the Investment Advisor is or becomes a party to any
action or proceeding in respect of which indemnification may be sought
hereunder, the Investment Advisor shall promptly notify the Fund thereof.
Following such notice, the Fund shall be entitled to participate therein and, to
the extent that it may wish, to assume the defense thereof with counsel
reasonably satisfactory to the Investment Advisor. After notice from the Fund to
the Investment Advisor of an election so to assume the defense thereof, the Fund
will not be liable to the Investment Advisor hereunder for any legal or other
expenses subsequently incurred by the Investment Advisor in connection with the
defense thereof other than reasonable costs of investigation unless counsel for
the Investment Advisor shall reasonably determine that there is a conflict of
interest which requires separate representation of the parties. The Fund shall
not be liable hereunder for any settlement of any action or claim effected
without its written consent thereto, which consent shall not be unreasonably
withheld, nor shall the Fund enter into any settlement which shall impose any
obligation on the Investment Advisor without its written consent.
8. Independent Contractor. For all purposes of this Agreement,
the Investment Advisor shall be an independent contractor and not an employee or
agent of the Fund, nor shall anything herein be construed as making the Fund a
partner or co-venturer with the Investment Advisor or any of its affiliates.
Except as provided in this Agreement, the Investment Advisor shall not have
authority to bind,
Page 17 of 19 Pages
<PAGE>
obligate or represent the Fund. Without limiting the generality of the
foregoing, the Investment Advisor shall have no authority whatsoever (nor shall
it have any duty) on behalf of the Fund to: (i) communicate with shareholders of
the Fund or with the general public; (ii) solicit sales of the Shares of the
Fund or accept subscriptions therefor; (iii) maintain the principal corporate
records or books of account of the Fund; (iv) disburse payments of dividends,
legal and accounting fees, and directors' and officers' salaries; or (v) make
redemptions of the shares of the Fund.
9. Information Concerning Activities. The Investment Advisor shall send
or arrange that there be sent to the Fund confirmations of all transactions for
its account. The Investment Advisor shall also furnish from time to time such
further information and reports concerning the activities undertaken by the
Investment Advisor on behalf of the Fund as the Fund may reasonably request.
10. Expenses. All expenses incurred directly in connection with
transactions effected or positions held on behalf of the Fund pursuant to the
Investment Advisor's exercise of its duties hereunder (including, without
limitation, custodial fees, clearing fees, brokerage commissions, interest and
commitment fees on loans and debit balances, withholding or transfer taxes and
other expenses as described in the Memorandum) shall be paid or reimbursed by
the Fund. The Investment Advisor shall bear its own overhead and other internal
operating costs, except that the Investment Advisor may cause certain of such
expenses to be paid out of brokerage commissions generated by trading on behalf
of the Fund as described in the Memorandum.
11. Term, Termination, Renewal and Survival.
(a) The initial term of this Agreement shall commence on the
date hereof and shall continue until the final dissolution and liquidation of
the Fund, subject to termination by either party upon not less than thirty (30)
days prior written notice to the other in the event of any material breach by
the other party of its obligations under this Agreement, which breach is not
remedied within such period.
(b) In the event of the termination of this Agreement, (i) the
Investment Advisor shall be entitled to the management fee accrued through the
date of termination, (ii) the provisions of Sections 6 and 7 shall survive any
termination, and (iii) the Investment Advisor shall have the right, at its
option, to resell the Founders Shares to the Fund at a purchase price equal to
the accrued but unpaid distributions due to the holders of Founders Shares
through the date of such termination based upon the Net Value of the Fund (as
defined in the Memorandum) as of such date.
12. Modification; Waiver. Except as otherwise expressly provided
herein, this Agreement shall not be amended nor shall any provision of this
Agreement be considered modified or waived unless evidenced by a writing signed
by the parties to be charged with such amendment, waiver or modification.
13. Entire Agreement; Binding Effect; Assignment. This Agreement
represents the entire agreement among the parties, shall be binding upon and
inure to the benefit of the parties hereto and their respective successors, and
their rights and obligations hereunder shall not be assignable, transferable or
delegable without the written consent of the other party hereto. Any attempted
assignment, transfer or delegation hereof without such consent shall be void.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Cayman Islands, without giving
effect to conflicts of law.
15. Counterparts. This Agreement may be signed in any number of
counterparts. Any single counterpart or a set of counterparts signed in either
case by the parties hereto shall constitute a full and original agreement for
all purposes.
Page 18 of 19 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
NETWORK FUND III, LTD.
By: /s/ P. Bailey
Name: P. Bailey
Title: Director
GILDEA MANAGEMENT COMPANY
By: /s/ William P. O'Donnell
Name: William P. O'Donnell
Title: Vice President
Page 19 of 19 Pages
