-----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, JbubEynZyGoKtuIebOfhYZbzm8sKAnblpCxKBUsoMnjSgPAdP2sBsv4qRCuzXE4x sguLZkSUmsoLYHs2OAIhSg== 0000889812-97-002700.txt : 19971222 0000889812-97-002700.hdr.sgml : 19971222 ACCESSION NUMBER: 0000889812-97-002700 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19971219 SROS: NASD GROUP MEMBERS: JOHN W. GILDEA GROUP MEMBERS: NETWORK FUND III LTD GROUP MEMBERS: NETWORK IV LLC 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: SEC FILE NUMBER: 005-06258 FILM NUMBER: 97741041 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) December 12, 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 34 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 244,500 Shares ---------------------------------------------------- Beneficially 8 Shared Voting Power Owned By 0 Each ---------------------------------------------------- Reporting 9 Sole Dispositive Power Person 244,500 With ---------------------------------------------------- 10 Shared Dispositive Power 0 - ------------------------------------------------------------------------------- 11 Aggregate Amount Beneficially Owned by Each Reporting Person 244,500 - ------------------------------------------------------------------------------- 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares [ ] - ------------------------------------------------------------------------------- 13 Percent of Class Represented By Amount in Row (11) 5.94% - ------------------------------------------------------------------------------- 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. and Network IV LLC. Page 2 of 34 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 199,500 Shares ---------------------------------------------------- Beneficially 8 Shared Voting Power Owned By 0 Each ---------------------------------------------------- Reporting 9 Sole Dispositive Power Person 199,500 With ---------------------------------------------------- 10 Shared Dispositive Power 0 - ------------------------------------------------------------------------------- 11 Aggregate Amount Beneficially Owned by Each Reporting Person 199,500 - ------------------------------------------------------------------------------- 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares [ ] - ------------------------------------------------------------------------------- 13 Percent of Class Represented By Amount in Row (11) 4.85% - ------------------------------------------------------------------------------- 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 and Network IV LLC. Page 3 of 34 Pages CUSIP No. 054615 10 9 - ------------------------------------------------------------------------------- 1 Name of Reporting Person3 S.S. or I.R.S. Identification No. of Above Person Network IV LLC - ------------------------------------------------------------------------------- 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 20,000 Shares ---------------------------------------------------- Beneficially 8 Shared Voting Power Owned By 0 Each ---------------------------------------------------- Reporting 9 Sole Dispositive Power Person 20,000 With ---------------------------------------------------- 10 Shared Dispositive Power 0 - ------------------------------------------------------------------------------- 11 Aggregate Amount Beneficially Owned by Each Reporting Person 20,000 - ------------------------------------------------------------------------------- 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares [ ] - ------------------------------------------------------------------------------- 13 Percent of Class Represented By Amount in Row (11) 0.49% - ------------------------------------------------------------------------------- 14 Type of Reporting Person CO - ------------------------------------------------------------------------------- - -------------- (3) Filing jointly pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, as amended, with John W. Gildea and Network Fund III, Ltd. Page 4 of 34 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"), Network Fund III, Ltd., a Cayman Islands exempt company ("Network Fund III"), and Network IV LLC, a Cayman Islands exempt company ("Network IV"), 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 199,500 shares of Common Stock (the "Network III 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 "Network III Investment Advisory Agreement"), a copy of which is attached hereto as Exhibit 2 and incorporated herein by reference. GMC also has the power to dispose of the 20,000 shares of Common Stock (the "Network IV Shares") owned by Network IV, by virtue of an Investment Advisory Agreement, dated May 7, 1997 (the "Network IV Advisory Agreement"), a copy of which is attached hereto as Exhibit 3 and is incorporated herein by reference. As a result, Gildea may be deemed to beneficially own the Network III Shares and Network IV Shares. Gildea also owns 25,000 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, a director of each of Network Fund III and Network IV and owns 1,500 shares of Common Stock (the "O'Donnell Shares"). Gildea, Network Fund III and Network IV 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. Each of Network Fund III's and Network IV'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 and Network IV 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 and Network IV are set forth on Schedule I hereto. None of Gildea, Network Fund III or Network IV 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 Page 5 of 34 Pages 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. Item 3. Source and Amount of Funds or Other Consideration. Gildea acquired 15,000 of the 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"). Gildea acquired 10,000 of the Gildea Shares in two open market purchases of 5,000 shares of Common Stock on December 12, 1997 at $17.80 per share of Common Stock and $17.13 per share of Common Stock, respectively, or an aggregate of $174,625, which funds were obtained from Gildea's personal funds. Network Fund III acquired 127,500 of the 199,500 Network III 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 72,000 of the 199,500 Network III Shares in a series of open market purchases and a sale between April 21, 1997 and December 12, 1997 for an aggregate of $1,349,875, all of which funds were obtained from the working capital of Network Fund III. Network IV acquired the 20,000 Network IV Shares in two open market purchases of 10,000 shares of Common Stock on December 12, 1997 at $18.25 per share of Common Stock and $17.80 per share of Common Stock, respectively, or an aggregate of $350,500, all of which funds were obtained from the working capital of Network IV. 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 15,000 of the Gildea Shares, Network Fund III acquired 127,500 of the Network III Shares and O'Donnell acquired the O'Donnell Shares pursuant to the Exchange Offer and Gildea acquired 10,000 of the Gildea Shares, Network Fund III acquired 72,000 of the Network III Shares and Network IV acquired the Network IV Shares, in a series of separate open market transactions. Each of Gildea, Network Fund III, Network IV and O'Donnell currently intends to hold the Gildea Shares, the Network III Shares, the Network IV Shares and the O'Donnell Shares, respectively, for investment. Page 6 of 34 Pages Each of Gildea, Network Fund III, Network IV and O'Donnell intends 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, Network IV 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, Network IV, 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, Network Fund III and Network IV 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. Item 5. Interest in Securities of the Issuer. (a) (i) The 199,500 Network III Shares, the 20,000 Network IV Shares and the 25,000 Gildea Shares beneficially owned by Gildea collectively represent 5.94% of the 4,113,190 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 .04% of the 4,113,190 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 199,500 Network III Shares represent 4.85% of the 4,113,190 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. (iv) The 20,000 Network IV Shares represent .49% of the 4,113,190 shares of Common Stock of the Company outstanding on the date hereof, based upon information as 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 III Shares and the Network IV 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 on Schedule II hereto and in this Schedule 13D none of Gildea, Network Fund III, Network IV, O'Donnell, or, to the best knowledge of such parties, any of the Page 7 of 34 Pages 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, Network Fund III or Network IV 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, the Network III Shares or the Network IV 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. Item 7. Materials to Be Filed as Exhibits. 1. Joint Filing Agreement, dated December 18, 1997. 2. Investment Advisory Agreement dated as of February 26, 1996, by and between GMC and Network Fund III. 3. Investment Advisory Agreement dated as of May 7, 1997 by and between GMC and Network IV. Page 8 of 34 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: December 18, 1997 /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 NETWORK IV LLC By: GILDEA MANAGEMENT COMPANY, Investment Advisor By: /s/ John W. Gildea ---------------------------- Name: John W. Gildea Title: President Page 9 of 34 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 10 of 34 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. Reporting Person:............... Network IV LLC P.O. Box 219, Butterfield House Grand Cayman, Cayman Islands, B.W.I. Executive Officers, Directors and Controlling Person: 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 11 of 34 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 12 of 34 Pages SCHEDULE II Purchases of Common Stock of AXSYS Technologies, Inc. by Gildea, Network Fund III, Network IV and O'Donnell during the last sixty (60) days. John W. Gildea -------------- Number Price Per Date of Shares Share ---- --------- --------- 12/12/97 5,000 $17.80 12/12/97 5,000 17.125 Network Fund III ---------------- Number Price Per Date of Shares Share ---- --------- --------- 10/22/97 30,000 $27.00 12/10/97 10,000 18.875 12/12/97 25,000 17.125 Network IV ----------- Number Price Per Date of Shares Share ---- --------- --------- 12/12/97 10,000 $18.25 12/12/97 10,000 17.80 William P. O'Donnell -------------------- None. Page 13 of 34 Pages EXHIBIT INDEX ------------- Page Exhibit Number - ------- ------ 1. Joint Filing Agreement, dated December 18, 1997. 16 2. Investment Advisory Agreement dated as of February 26, 1996, by and between GMC and Network Fund III. 18 3. Investment Advisory Agreement dated as of May 7, 1997, by and between GMC and Network IV. 24 Page 14 of 34 Pages EX-99.1 2 JOINT FILING AGREEMENT, DATED DECEMBER 18, 1997 EXHIBIT 1 Page 15 of 34 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: December 18, 1997 /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 NETWORK IV LLC By: GILDEA MANAGEMENT COMPANY, Investment Advisor By: /s/ John W. Gildea ---------------------- Name: John W. Gildea Title: President Page 16 of 34 Pages EX-99.2 3 INVESTMENT ADVISORY AGREEMENT DATED AS OF FEBRUARY 26, 1996, BY AND BETWEEN GMC AND NETWORK FUND III EXHIBIT 2 Page 17 of 34 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 18 of 34 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 19 of 34 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 20 of 34 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 21 of 34 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 22 of 34 Pages EX-99.3 4 INVESTMENT ADVISORY AGREEMENT DATED AS OF MAY 7, 1997, BY AND BETWEEN GMC AND NETWORK IV EXHIBIT 3 Page 23 of 34 Pages INVESTMENT ADVISORY AGREEMENT THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made as of the 7th day of May, 1997, by and between NETWORK IV LLC, a Cayman Islands exempted company (the "Fund"), and GILDEA MANAGEMENT COMPANY, a Delaware, U.S.A. corporation (the "Investment Advisor"): W I T N E S S E T H: WHEREAS, the investment objective of the Fund is to provide investors with superior returns substantially exceeding those generally available in the financial markets by opportunistic investing in event-driven special situations, all as more fully described in the Fund's Confidential Private Placement Memorandum dated October 31, 1996 attached hereto as Exhibit A (said Confidential Private Placement Memorandum as further amended and supplemented from time to time by the Fund, including further amendments, supplements (including but not limited to the Supplement dated February 26, 1997), and additional private placement memoranda necessary to offer and sell Shares at any time and from time to time, shall hereinafter be referred to as the "Memorandum"); WHEREAS, the Fund has sold and intends to sell redeemable voting shares of the Fund (the "Shares") in an offering described in the Memorandum; WHEREAS, the Fund desires the Investment Advisor, upon the terms and conditions set forth herein, to act as Investment Advisor for the Fund and to make investment decisions for the Fund with respect to the fund's assets and the Investment Advisor desires so to act; WHEREAS, the Investment Advisor is engaged in the business of making investment decisions on behalf of investors; and WHEREAS, unless otherwise provided, capitalized terms used herein shall have the same meanings given such terms in the Memorandum. NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. Undertakings of the Investment Advisor (a) The Investment Advisor agrees to make to the Fund all disclosures necessary regarding the Investment Advisor and its affiliates. (b) If the Investment Advisor shall become aware of any materially untrue or misleading statement of a fact or any omission of a material fact contained in the Memorandum regarding the Investment Advisor or its affiliates or of the occurrence of any event or change in circumstances which shall have resulted in there being any such materially untrue or misleading statement of a material fact or any such omission of a material fact, the Investment Advisor promptly shall inform the Fund and cooperate with the Fund in the preparation of any necessary amendments or supplements to the Memorandum. (c) During the term of this Agreement, the Investment Advisor and its affiliates shall be free to advise other investors as to the purchase and sale of securities, to manage and invest other investors' accounts, and to invest for and on behalf of their own proprietary accounts. Although the Investment Advisor and its affiliates manage investments on behalf of a number of other customer accounts, investment decisions and allocations need not necessarily be made in parallel among the Fund's Page 24 of 34 Pages account and the other customer accounts. Investments made by the Fund need not, and are not intended to, necessarily replicate the investments, or the investment methods and strategies of other accounts managed by the Investment Advisor and its affiliates. The Investment Advisor and its affiliates at times and from time to time may elect to apportion major or minor portions of the investments made by the Fund among other accounts managed by the Investment Advisor and its affiliates; however, that apportionment will not necessarily be made in parallel and will not necessarily be based on the capital in each account. Rather, such investments will be allocated among accounts based on the Investment Advisor's perception of the appropriate risk and reward ratio for each account, the investment methodology adopted for each account, the liquidity of the account at the time of the investment and on a going-forward basis, and the overall portfolio composition and performance of the account. Accordingly, the Fund acknowledges that the other accounts managed by the Investment Advisor and its affiliates may produce results that are materially different form those experienced by the Fund. In addition, the Fund understands and agrees that other accounts managed by the Investment Advisor and its affiliates may be competing for the same positions as the Fund, to the possible disadvantage of the Fund. 2. Duties of the Investment Advisor. The Investment Advisor shall act as Investment Advisor for the Fund. The Investment Advisor shall have sole and exclusive authority and responsibility for directing the investment and reinvestment of the Fund's Net Assets pursuant to and in accordance with the Investment Advisor's best judgment and methodologies, and as refined and modified from time to time in the future by the Investment Advisor, for the period and on the terms and conditions set forth herein. The investment services provided by the Investment Advisor will include, but not be limited to: evaluating potential investments; analyzing and evaluating the capabilities of the management and business plans of potential portfolio companies; negotiating terms, conditions, and price levels of each investment; making sales and placing orders with brokers and dealers to execute portfolio transactions on behalf of the Fund. In assessing the risks and potential returns on investment opportunities, the Investment Advisor may seek advice and assistance from other investment groups and draw upon the expertise and experience of business associates, brokerage firms' research departments, independent research authorities, clients and investors. 3. Investment Advisor Independent. For all purposes of this Agreement, the Investment Advisor shall be deemed to be an independent contractor of the Fund, the Investment Advisor shall have no authority to act for or represent the Fund, its affiliates, officers, directors or employees in any way and shall not otherwise be deemed to be an agent of the Fund. Except as shall be specifically provided otherwise in this Agreement, nothing contained herein shall create or constitute the Investment Advisor or the Fund as members of any partnership, joint venture, association, syndicate, unincorporated business, or other separate entity, nor shall be deemed to confer on either of them any express, implied, or apparent authority to incur any obligation or liability on behalf of any other. 4. Fees (a) Performance Fee. The Investment Advisor will receive a performance fee equal to 20% of Net Profit per Share, if any, calculated at each calendar year-end (or on a Redemption Date if prior to a calendar year-end), but only if Net Profit exceeds a non-compounded annual preferred return of 7% (the "Preferred Return"); Net Profit between 7% and 8.75% will be paid to the Investment Advisor (so that the Investment Advisor will receive 20% of the first 8.75% per annum of Net Profit). The Preferred Return will be pro-rated for partial years through each December 31st, but will not be applicable to Shares redeemed by a Shareholder prior to a December 31st -- that is, the Preferred Return will apply only to Shares that have not been redeemed by a Shareholder during a calendar year on a March 31st, June 30th or September 30th (or any date other than December 31st). Net Profit includes both realized and unrealized gains. Page 25 of 34 Pages Net Profit (and Net Loss) is the sum of (i) the net of any profits and losses realized on all investments closed out during the fiscal period plus (ii) the net of any unrealized profits and losses on any open positions as of the end of such fiscal period (after deduction for accrued brokerage commissions and other transaction costs) plus (iii) interest and dividend income, minus (iv) the net of any unrealized profits or losses on open positions as of the end of the preceding fiscal period. Profits and losses are calculated by reference to market value, determined pursuant to the conventions described below in Section 4(d). There is Net Profit only if and to the extent there is no Loss Carryforward. The Loss Carryforward is the sum of (i) any cumulative Net Loss from fiscal periods ending prior to the fiscal period of calculation plus (ii) the non-compounded Preferred Return from such prior fiscal periods minus (iii) any cumulative Net Profit for such prior fiscal periods. (b) Management Fee. For the services to be rendered to the Fund by the Investment Advisor under this Agreement, in addition to the performance fee provided in subsection (a) above, the Fund shall pay the Investment Advisor a management fee equal to 0.4375% (approximately 1.75% annualized) of the Net Assets of the Fund as of the end of such quarter. The management fee with respect to any Share for any quarter in which such Share has not been outstanding for the entire quarter shall be pro-rated on the basis of the number of whole or partial months the Share has been outstanding during such quarter. For purposes of calculating quarterly management fees, Net Asserts are not reduced by any management or performance fees payable or incurred by the Fund during such quarter, any distributions paid during the quarter, or any redemptions payable at quarter-end. (c) Other Compensation to the Investment Advisor. The Investment Advisor and its principals and affiliates will be entitled to receive and retain from third parties or portfolio companies any investment banking fees or transaction-related fees, arising from investments made by the Fund, as well as fees for serving on boards of directors of portfolio companies in which the Funds are invested. (d) "Net Assets" and Valuation of Securities. The Net Assets of the Fund are the total assets of the Fund, including all cash and cash equivalents (valued at cost), accrued interest, and the market value of all securities and all other assets of the Fund, less all other liabilities of the Fund, including, but not limited to, accrued legal, accounting, and auditing fees, accrued management and performance fees, and any extraordinary expenses, determined in accordance with U.S. generally accepted accounting principles applied under the accrual basis of accounting by the Directors of the Fund in their sole discretion. For purposes of determining the value of securities and other interests owned by the Fund, the following conventions shall apply: The market value of a security traded on an exchange shall be its closing price or, if applicable, the mean of its closing bid and asked prices on the date of determination. If the exchange on which a security is required to be valued is closed, or if a security did not trade on such exchange on the date of determination, such security shall be valued as if the date of determination were the last previous date on which such exchange was open, or on which such security traded on such exchange. For this purpose, an "exchange" shall mean the exchange on which the security was traded in the greatest volume in the calendar quarter prior to the date of determination and shall include normal securities trading markets which do not meet the formal requirements for exchanges, including, for example, the quotation system of the National Association of Securities Dealers, Inc. ("NASD") customarily known as NASDAQ. Unlisted securities and securities which the Directors believe to be not readily marketable will be valued initially at cost and thereafter with any reduction or increase in value (as the case may be) as the Directors in their absolute discretion shall deem to result in an appropriate estimation of fair value. The Directors may rely in this regard on the opinion of an independent source or sources or on the Investment Page 26 of 34 Pages Advisor. Notwithstanding anything to the contrary stated above, if the Directors determine that the valuation of any security or other property does not fully represent market value (whether because of illiquidity or otherwise), the Directors shall value such security or other property as they reasonably determine and shall set forth the basis of such valuation in writing in the Fund's records. (e) Time for Payment of Fees. Any performance fees payable to the Investment Advisor in accordance with this Agreement shall be paid by the Fund to the Investment Advisor within 30 days after the end of each calendar year, and any management fee payable to the Investment Advisor in accordance with this Agreement shall be paid by the Fund to the Investment Advisor within 10 days after the end of each calendar quarter; provided, however, that the Investment Advisor may elect pursuant to the provisions of Section 4(f) below to defer the payment of all or any portion of the management and/or performance fees and have such management and performance fees paid to a trust (or other account agreed to by the Fund and the Investment Advisor) to be organized by the Fund for the benefit of the Investment Advisor pursuant to such terms and conditions as the fund and the Investment Advisor shall agree (the "Trust"). In the latter event, the Fund shall transfer such deferred management and/or performance fees, if any, at the times described in the immediately preceding sentence to the Trust pursuant to the terms of a Trust Agreement, a copy of which will be appended to this Agreement. In the case of termination of the Investment Advisor under this Agreement, the performance and management fees shall be computed as if the effective date of termination were the last day of the then current year and quarter, respectively. The terms of the Trust shall at all times conform to the terms of the model trust contained in Revenue Procedure 92-64 or any subsequent pronouncement by the United States Internal Revenue Service containing required terms for an unfunded deferred compensation arrangement. (f) Periodic Election. The Investment Advisor may elect pursuant to the provisions of this Agreement to defer the payment of all or a portion of the management and/or performance fees for a particular fiscal period and pay such management and/or performance fee to the Trust. The management and/or performance fees for such fiscal period shall be payable only as provided herein. Separate elections may be made with respect to each fiscal period; provided, however, that in the absence of a new election with respect to a fiscal period, the election for the most recent prior fiscal period shall apply. An election to defer the payment of all or a portion of the management and/or performance fees for a particular fiscal period and to pay such management and/or performance fees to the Trust shall be made on or before the first day of such fiscal period by a written notice sent by the Investment Advisor to the Fund. Each notice delivered pursuant to this subsection 4(d) shall state: (i) the amount or percentage of the management and/or performance fees to be paid to the Investment Advisor pursuant to subsection 4(e) hereof, and the amount or percentage of the management and/or performance fees to be deferred and paid to the Trust; (ii) the distribution date(s); and (iii) the amount or percentage of such fees (inclusive or exclusive of profit and loss thereon) to be distributed by the Trust to the Investment Advisor on each distribution date. (g) Computation of Performance Fees. Promptly after receipt by the Fund of monthly statements from the Fund's broker(s), the Fund shall forward to the Investment Advisor a reasonably itemized statement setting forth the calculation of the amount of the performance fees due or accrued to the Investment Advisor in respect of such month. (h) Soft Dollar Arrangements. the Fund acknowledges that he Investment Advisor may obtain goods or services by directing commission business to broker-dealers which provide the Investment Advisor with such goods or services. Page 27 of 34 Pages (i) Reduction of Fees Based on Selling Arrangements. The fees payable to the Investment Advisor pursuant to this section 4 shall be reduced pursuant to the provisions of this Section 4(i) to the extent that Net Assets are derived from investors who purchase Shares pursuant to selling arrangements with selling agents ("Selling Agents") contractually retained by the Fund which provide bona fide sales efforts to the Fund and which Selling Agents and Selling Agent arrangements are agreed to by the Investment Advisor. 5. Policies of the Fund. The activities engaged in by the Investment Advisor on behalf of the Fund shall be subject to the policies and control of the Directors of the Fund. The Investment Advisor shall submit such periodic reports to the Directors of the Fund regarding the Investment Advisor's activities hereunder as the Director of the Fund may reasonably request. 6. Investments. All investments of the Fund shall at all times conform to and be in accordance with the requirements imposed by: (a) any provisions of applicable law; (b) provisions of the Memorandum and Articles of the Fund, as such Memorandum and Articles may be amended, supplemented or revised from time to time; (c) the policies set forth in the Memorandum; and (d) such policies as may be adopted from time to time by the Directors of the Fund. 7. Reimbursement of the Fund. The Investment Advisor may retain, in connection with its responsibilities hereunder, the services of others to assist in the investment advice to be given to the Fund, but payment for any such services shall be assumed by the Investment Advisor and the Fund shall not have any liability therefor; provided, however, that the Investment Advisor may in its discretion retain the services of legal counsel to advise it in connection with the performance of its activities on behalf of the Fund hereunder and the Fund shall bear full responsibility for and the expense of any legal fees and disbursements arising therefrom. 8. Expenses of the Fund. The Fund shall bear full responsibility for and the expenses of: (a) directors' and officers' fees and salaries; (b) custodian fees; (c) payment of taxes other than those incurred in connection with facilities and services rendered by the Investment Advisor at the Investment Advisor's expense; (d) the Fund's legal fees and disbursements; (e) maintenance of its corporate records and books of account, including auditing fees and disbursements; (f) organization and conduct of its directors' and shareholders' meetings and the preparation and distribution of all of its shareholders' reports and other communications with shareholders; Page 28 of 34 Pages (g) the calculation of the net asset value of its shares by its accountants, in a manner determined by its Board of Directors and the publication thereof; (h) soliciting sales and acceptance of subscriptions for its shares; (i) issuing, transferring and redeeming its shares and of paying dividends or making other distributions thereon; (j) brokerage commissions on its purchases and sales of securities; (k) its communications with the public; and (l) other operations and expenses related to the investment of the Fund's assets and which are not related to functions assumed by the Investment Advisor hereunder. 9. Expenses of the Investment Advisor. Except to the extent otherwise provided in this Agreement, the Investment Advisor will perform its obligations under this Agreement at its own expense, including, without limitation, the salaries of employees necessary for such services, the rent and utilities for the facilities provided and operating expenses, except as assumed by the Fund under this Agreement. 10. Term and Termination (a) Term and Renewal. This Agreement shall continue in effect until December 31, 1999. Thereafter, this Agreement shall be renewed automatically for additional one-year terms unless either the Fund or the Investment Advisor, upon written notice given not less than 90 days prior to the original termination date or any extended termination date, shall notify the other party of its intention not to renew. (b) Termination. Notwithstanding Section 10(a) hereof, this Agreement shall terminate: (i) immediately if the Fund shall terminate and be dissolved in accordance with its Memorandum of Association or Articles of Association or otherwise; or (ii) immediately if the Investment Advisor can no longer effectively implement its investment strategy on behalf of the Fund; or (iii) immediately, at the discretion of the Fund, if the Investment Advisor shall become bankrupt or insolvent; or (iv) upon not less than thirty (30) days' prior written notice, at the discretion of the Fund, if the Investment Advisor shall fail to perform any of its obligations under this Agreement; or (v) upon not less than thirty (30) days' prior written notice, at the discretion of the Investment Advisor, if the Fund shall fail to perform any of its obligations under this Agreement. (c) Fee Payments and Indemnities Survive Termination. The fee payment obligations set forth in Section 4, and the indemnities set forth in Section 11, of this Agreement shall survive any termination hereof. Page 29 of 34 Pages 11. Standard of Liability and Indemnity (a) Standard of Liability. The Investment Advisor and its employees, affiliates, agents, and their respective successors and assigns shall not be liable to the Fund, the Fund's stockholders, directors, officers, employees, principals, affiliates, and agents, and their respective successors and assigns except for an act, omission, conduct, or activity in respect of the Fund which shall be found by a court of competent jurisdiction upon entry of final judgment (or, if no final judgment shall be entered, by an opinion rendered to the fund by independent legal counsel retained by the Fund and acceptable to the Investment Advisor for such purpose) to have constituted fraud, willful misconduct or gross negligence and to have not been done by any such person in good faith and in the reasonable belief that such act, omission, conduct, or activity was in or not opposed to the best interests of the Fund. (b) Fund's Agreement to Indemnify. The Fund shall indemnify, hold harmless, and defend the Investment Advisor and its employees, affiliates and agents, and their respective successors and assigns from and against any loss, liability, claim, demand, damage, cost, and expense (including reasonable attorneys' and accountants' fees and expenses), to which an indemnified party may become subject in respect of the Fund (including in connection with the defense or settlement of claims and in connection with any administrative proceedings), arising out of or based upon this Agreement or the Investment Advisor's activities on behalf of the Fund, provided that such loss, liability, claim, demand, damage, cost, and expense did not constitute fraud, willful misconduct, or gross negligence by the Investment Advisor and was done by the Investment Advisor and its employees, affiliates and agents in good faith and in the reasonable belief that it was in or not opposed to the best interests of the Fund. (c) Indemnity Procedure. Promptly after receipt by an indemnified party under Section 11(b) of notice of the commencement of an action or claim to which either such Section may apply, the indemnified party shall notify the indemnifying party in writing of the commencement of such action or claim if a claim for indemnification in respect of such action or claim may be made against the indemnifying party under either such Section; but the omission so to notify the indemnifying party shall not relieve the indemnifying party from any liability which the indemnifying party may have to the indemnified party under either such Section (except where such omission shall have materially prejudiced the indemnifying party) or otherwise. In case any such action or claim shall be brought against an indemnified party and the indemnified party shall notify the indemnifying party of the commencement of such action or claim, the indemnifying party shall be entitled to participate in such action or claim and, to the extent that the indemnifying party may desire, to assume the defense of such action or claim with counsel selected by the indemnifying party and approved by the indemnified party. After notice from the indemnifying party to the indemnified party of the indemnifying party's election so to assume the defense of such action or claim, the indemnifying party shall not be liable to the indemnified party for any legal, accounting, and other fees and expenses subsequently incurred by the indemnified party in connection with the defense of such actions or claim other than reasonable costs of investigation. Notwithstanding any provision of this Section 11(d) to the contrary, if in any action or claim in which both the indemnifying party and the indemnified party are named as parties and the defense of both parties gives rise to a conflict of interest, the indemnified party may retain its own counsel in connection with such action or claim, in which case the indemnifying party shall be responsible for any legal, accounting and other fees and expenses reasonably incurred by or on behalf of it in connection with investigating or defending such action or claim. In no event shall an indemnifying party be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action or claim or in connection with separate but similar or related actions or claims in the same jurisdiction arising out of the same general allegations. An indemnifying party shall not be liable for a settlement of any such action or claim effected without its written consent, but if any such action or claim shall be settled with the written consent of an indemnifying party or if there shall be a final judgment for the plaintiff in any such action or claim, the indemnifying party shall indemnify, hold harmless, and defend Page 30 of 34 Pages an indemnified party from and against any loss, liability, or expense in accordance with Section 6 by reason of such settlement or judgment. (d) The Fund shall advance to the Investment Advisor the reasonable costs and expenses of investigating and/or defending any loss, liability, claim, demand, or damage to which the Investment Advisor may become subject in respect of the Fund, 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 under this Section 11. 12. Representations and Warranties (a) The Investment Advisor hereby represents and warrants to the Fund as follows: (i) The Investment Advisor has full power and authority and is permitted by applicable law to enter into and carry out its obligations under this Agreement and own its properties and conduct its business as described in this Agreement. (ii) The performance of the obligations under this Agreement by the Investment Advisor will not conflict with, violate the terms of or constitute a default under any indenture, mortgage, deed of trust, loan agreement, management or advisory agreement, or other agreement or instrument to which the Investment Advisor or its employees or affiliates is a party or by which any such person is bound or to which any of the property or assets of any such person is subject, or any order, rule, law, regulation or other legal requirement applicable to any such person or to the property or assets of any such person. (iii) The Investment Advisor has complied and will continue to comply with all laws, rules, and regulations having application to its or his business, properties, and assets. Except to the extent otherwise disclosed to the Fund, there are no actions, suits, proceedings, or investigations pending or threatened against the Investment Advisor or its principals, at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, bureau, agency, or instrumentality, any self-regulatory organization, or any exchange that might be material to an investor investing in the Fund. (iv) The Investment Advisor is duly organized and validly existing under the laws of the State of Delaware. (v) The Investment Advisor represents and the Fund acknowledges and agrees that: (A) The performance fee and management fee may create an incentive for the Investment Advisor to make investments that are riskier or more speculative than would be the case in the absence of such fees. (B) The Investment Advisor may receive increased compensation with regard to unrealized appreciation as well as realized gains in the Fund's account. (C) The performance fee may result in substantially higher payments than alternative compensatory arrangements with other managers. (vi) The foregoing representations and warranties shall be continuing during the term of this Agreement and if at any time any event shall occur which could make any of the Page 31 of 34 Pages foregoing materially incomplete or inaccurate, the Investment Advisor promptly shall notify the Fund of the occurrence of such event. (b) The Fund hereby represents and warrants to the Investment Advisor as follows: (i) The information contained in the Memorandum, other than information supplied by the Investment Advisor, is true, accurate, and complete in all material respects and does not contain any misleading or untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (ii) The Fund has full power and authority and is permitted by applicable law to enter into and carry out its obligations under this Agreement and to own its properties and conduct its business as described in this Agreement and the Memorandum. (iii) The performance of the obligations under this Agreement by the Fund will not conflict with, violate the terms of, or constitute a default under any indenture, mortgage, deed of trust, loan agreement, management or advisory agreement, or other agreement or instrument to which the Fund is a party or by which the Fund is bound or to which any of the property or assets of the fund is subject, or any other, rule, law, regulation, or other legal requirement applicable to the fund or to the property or assets of the Fund. (iv) The Fund has all required governmental and regulatory registrations and memberships necessary to carry out its obligations under this Agreement. (v) The Fund has complied and will continue to comply with all laws, rules, and regulations having application to its business, properties, and assets. Except as set forth in the Memorandum, there are no actions, suits, proceedings, or investigations pending or threatened against the Fund, at law or inequity or before or by any federal, state, municipal, or other governmental department, commission, board, bureau, agency, or instrumentality, any self-regulatory organization, or any exchange. (vi) The Fund is duly organized and validly existing under the laws of the jurisdiction of its incorporation. (vii) This Agreement constitutes an arm's length agreement between the Fund and the Investment Advisor. The Fund understands the method of compensation provided for herein and its risks. (viii) The foregoing representations and warranties shall be continuing during the term of this Agreement and if at any time any event shall occur which could make any of the foregoing incomplete or inaccurate, the Fund shall promptly notify the Investment Advisor of the occurrence of such event. 13. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding as between the parties unless it shall be in writing and signed by the party against whom enforcement is sought. 14. Assignment. This Agreement shall not be assigned by either party hereto without the prior express written consent of the other party. Page 32 of 34 Pages 15. Amendment; Waiver. This Agreement shall not be amended except by a writing signed by the parties hereto. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or form any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions. 16. Severability. If any provision of this Agreement, or the application of any provision to any person or circumstance, shall be held to be inconsistent with any present or future law, ruling, rule, or regulation of any court or governmental or regulatory authority having jurisdiction over the subject matter hereof, such provision shall be deemed to be rescinded or modified in accordance with such law, ruling, rule, or regulation, and the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it shall be held inconsistent, shall not be affected thereby. 17. Notices. Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered by courier service, postage prepaid mail, telex, telegram, or other similar means and shall be effective upon actual receipt by the party to which such notice shall be directed, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): if to the Fund: Network IV LLC P.O. Box 219 Butterfield House Grand Cayman Cayman Islands, B.W.I. Fax: (809) 949-8154 with copies to: Abacus Asset Management Limited La Motte Chambers St. Helier Jersey JB1 1BJ Channel Islands Fax: (441) 53 460 2433 and William Natbody, Esq. Rosenman & Colin, LLP 575 Madison Avenue New York, New York 10020 Fax: (212) 940-7079 if to the Investment Advisor: Gildea Management Company 115 Putnam Avenue, 3rd Floor Greenwich, Connecticut 06830 Att: Bill O'Donnell Fax: (203) 861-6727 Page 33 of 34 Pages 18. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, U.S.A. (excluding the law thereof which requires the application of or reference to the law of any other jurisdiction). 19. Consent to Jurisdiction. The parties hereto agree that any action or proceeding arising directly, indirectly, or otherwise in connection with, out of, related to, or from this Agreement, any breach hereof, or any transaction covered hereby, shall be resolved, whether by arbitration or otherwise, within the County, City, and State of New York. Accordingly, the parties consent and submit to the jurisdiction of the federal and state courts and any applicable arbitral body located within the County, City, and State of New York. The parties further agree that any such action or proceeding brought by either party to enforce any right, assert any claim, or obtain any relief whatsoever in connection with this Agreement shall be brought by such party exclusively in the federal or state courts, or if appropriate before any applicable arbitral body, located within the County, City, and State of New York. 20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 21. Headings. Headings to sections and subsections in this Agreement are for the convenience of the parties only and are not intended to be a part of or to affect the meaning or interpretation hereof. 22. No Third Party Beneficiaries. This Agreement is not intended to and shall not convey any rights to persons not a party to this Agreement. 23. Sales Literature and Reports. No sales literature or reports to investors describing the Investment Advisor, its investment strategies, personnel, or performance (other than the performance of the Fund) will be distributed by the Fund or its agents without the prior written approval of the Investment Advisor. IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first written above. NETWORK IV LLC By: /s/ Peter Bailey ------------------------------ Name: Peter Bailey Title: Director GILDEA MANAGEMENT COMPANY By: /s/ William P. O'Donnell ------------------------------ Name: William P. O'Donnell Title: Managing Director Page 34 of 34 Pages -----END PRIVACY-ENHANCED MESSAGE-----