-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oc5eEXKBTJ6XOyNjRME4n8DiQTnuAsJN7+Esm+zbTuT0pxkeYESs+eAZ7YBsM8cQ VfmGHElfykFCZ0G6ANBVAw== 0000889812-97-001068.txt : 19970502 0000889812-97-001068.hdr.sgml : 19970502 ACCESSION NUMBER: 0000889812-97-001068 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19970501 SROS: NASD GROUP MEMBERS: JOHN W. GILDEA GROUP MEMBERS: NETWORK FUND III LTD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AXSYS TECHNOLOGIES INC CENTRAL INDEX KEY: 0000206030 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 111962029 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-06258 FILM NUMBER: 97593590 BUSINESS ADDRESS: STREET 1: 645 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125937900 MAIL ADDRESS: STREET 1: 645 MADISON AVENUE STREET 2: 645 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: VERNITRON CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK FUND III LTD CENTRAL INDEX KEY: 0001038537 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O GILDEA MANAGEMENT CO STREET 2: 115 EAST PUTNAM AVENUE CITY: GREENWICH STATE: CT ZIP: 06830 MAIL ADDRESS: STREET 1: C/O GILDEA MANAGEMENT CO STREET 2: 115 EAST PUTNAM AVENUE CITY: GREENWICH STATE: CT ZIP: 06830 SC 13D 1 GENERAL STATEMENT OF BENEFICIAL OWNERSHIP 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 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 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 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 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 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 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 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 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 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 EXHIBIT INDEX
Page Exhibit Number 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
Page 11 of 19 Pages EX-99.1 2 OWNERSHIP OF SHARES AGREEMENT EXHIBIT 1 Page 12 of 19 Pages 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 EX-99.2 3 INVESTMENT ADVISORY AGREEMENT EXHIBIT 2 Page 14 of 19 Pages 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 (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 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----