MANAGEMENT SERVICES AGREEMENT
EXHIBIT
10.1
This
Management Services Agreement (this “Agreement”), by and between SMG Indium
Resources Ltd., a Delaware corporation (the “Company”) and Specialty Metals
Group Advisors LLC, a Delaware limited liability company (the “Manager”),
entered into as of _____ __, 2008 and effective immediately upon the
effectiveness of the initial public offering of the Company (the “IPO”).
AGREEMENT
In
consideration of the mutual promises, covenants and conditions hereinafter
set
forth, the parties hereto mutually agree as follows:
| 1. |
Retention
of Manager.
|
| a. |
Duties
of Manager.The
Company hereby retains Manager to actively assist in the management
of the
Company’s operations. Manager accepts such appointment and agrees to
discharge faithfully and diligently the duties set forth herein and
implement the policies established by the Company’s board of directors
(the “Board of Directors”), including, but not limited to, the
following:
|
| i. |
Use
its best efforts to negotiate, arrange, and execute (subject to the
requirements set forth on Schedule
1),
for and on the Company’s behalf, through industry-standard tenders, the
purchase and stockpile of 99.97% purity or better indium over a prudent
period of time. For purposes of this Section 1(a)(i), a prudent period
of
time shall mean the Manager utilizing at least 50% of the net proceeds
of
the IPO that have been allocated for purchase of the Company’s stockpile
within 18 months after the closing of the IPO. The Manager, on the
Company’s behalf, may enter into long-term and or short-term supply
contracts with indium suppliers;
|
| ii. |
Provide
to the Board of Directors delivery and payment particulars with respect
to
each purchase and sale of indium;
|
| iii. |
Use
best efforts to negotiate and arrange for the transportation and storage
of the Company’s indium stockpile at third-party facilities located in the
United States, Canada and or the United Kingdom, in accordance with
standard industry terms. The Manager is not required to retain a custodian
on our behalf;
|
| iv. |
Use
best efforts to negotiate and arrange for indemnities or insurance
on the
Company’s indium stockpile, in accordance with standard industry practices
by either the third-party storage facility’s insurance policy, a
separately purchased insurance policy or both;
|
| v. |
Conduct
limited inspections of the indium delivered to the Company regarding
the
99.97% purity or better requirements, based on the
following:
|
| 1. |
if
indium is purchased from a supplier known to be a regular indium industry
supplier, the Manager will not be responsible for conducting any chemical
assays or other tests designed to verify that such indium meets the
99.97%
purity or better requirements as established by Regular Industry Practice.
For the purposes of this Agreement, Regular Industry Practice means
purchasing, storing or selling the metal indium containing a 99.97%
purity
level or better, delivered in the form of Ingots, which are individually
wrapped in transparent polyethylene bags having a minimum thickness
of
0.004 inches;
|
| 2. |
if
indium is purchased from a third-party supplier that is not known to
be a
regular indium industry supplier, the Manager, at its discretion, may
hire, at the Company’s expense, an independent lab to perform random assay
tests using glow-discharge mass spectrometry (“GDMS”) to verify the purity
of the indium;
|
| vi. |
At
the Manager’s discretion, negotiate and arrange for the lending and/or
sale of indium from the Company’s stockpile to: (1) generate cash to
satisfy the Company’s operating expenses (2) facilitate the Manager’s
ability to negotiate long-term and or short-term supply contracts with
potential indium suppliers to acquire an indium stockpile (3) take
advantage of periodic shortages in the indium market based on market
conditions that the Manager deems favorable to the
Company;
|
| vii. |
Arrange,
negotiate and execute (subject to the requirements set forth on
Schedule
1)
any additional documents regarding the acquisition, storage, insuring
and
disposition of indium on the Company’s behalf, including, but not limited
to, corporate, title, environmental, financial documents and other
material agreements regarding the acquisition, storage, insuring and
disposition of indium on the Company’s
behalf;
|
| viii. |
On
a monthly basis, prepare a report (the “Monthly Report”) to be made
available to the Company and the Board of Directors regarding the net
market value (the “NMV”) of each share of the Company’s common stock. NMV
shall be determined by multiplying the number of kilograms of indium
held
by or for the Company by the last spot price for indium published by
Metal
Bulletin posted on Bloomberg L.P. for the month, plus cash and any
other
Company assets, less any and all of the Company’s outstanding payables,
indebtedness and any other liabilities, divided by the total number
of
outstanding common shares. The Manager acknowledges and understands
that
the Company will disclose to the stockholders of the Company such Monthly
Reports prepared by the Manager regarding the Company’s NMV;
|
| ix. |
Prepare,
or cause to be prepared, any and all regulatory filing materials, reports
to the Company’s stockholders, and other reports to the Board of Directors
as may be reasonably requested from time to time;
and
|
| x. |
Furnish
office facilities, service and supplies and generally oversee with
the
Management’s staff and independent contractors, management of the
Company’s business and affairs.
|
| b. |
Distribution
of Unused Proceeds of IPO.
If the Manager has not, within eighteen (18) months after the closing
of
the IPO, purchased indium in sufficient quantities to utilize at least
50%
of the net proceeds of the IPO that have been allocated for the purchase
of the Company’s indium stockpile, the Board of Directors will have the
discretion to cause the Company to distribute such unused proceeds
to the
stockholders of the Company as of a record date set by the Company.
Such
decision by the Board of Directors to distribute the unused proceeds
to
the stockholders will be based on numerous industry factors, including,
but not limited to, whether or not the Manager has entered into any
long-term supply contracts and any other factors affecting market
conditions at that time. The Company is not required to, nor will it,
place the unused cash set aside for the purchase of indium, into an
escrow
account.
|
| c. |
Duties
of Company.
|
| i. |
The
Company shall pay all fees and expenses in accordance with the operation
of the Company and services performed by the Manager pursuant to this
Agreement, except where expressly assumed by the Manager.
|
| ii. |
In
the event the Manager elects to purchase indium on the Company’s behalf,
pursuant to long-term or short-term contracts with an indium supplier,
the
Company shall have funds reserved to satisfy such purchase price and
shall
pay such purchase price.
|
| iii. |
In
the event the Manager elects to lend or sell indium on the Company’s
behalf, pursuant to long-term or short-term contracts with an indium
customer, the Company shall have the required amount of indium reserved
to
satisfy the delivery commitments pursuant to such contracts.
|
| 2. |
Fees
and Expenses.
|
| a. |
Management
Fee.
In consideration for providing the services hereunder, Manager shall
receive from the Company, and the Company shall pay to the Manager,
regardless of its ability to successfully purchase and stockpile the
metal
indium, an annual fee equal to two (2.0%) percent based on the Company’s
NMV. Such Management Fee shall be paid on a monthly basis. For purposes
of
this Section 2, the monthly Management Fee shall be determined by (x)
multiplying the number of kilograms of indium held by the Company by
the
last spot price for indium published by Metal Bulletin posted on Bloomberg
L.P. for the month, plus cash and any other Company assts, less any
and
all of the Company’s outstanding payables, indebtness and any other
liabilities, divided by the total number of outstanding common shares
(y)
multiplied by two (2%) percent and (z) divided by twelve (12). Such
Management Fee shall be determined on the 30th
day of each month and payable on or before the 10th
day following the end of such month.
|
2
| b. |
Expenses.
The Company shall be responsible for the payment of any and all fees
and
expenses incurred by the Manager in connection with the services performed
by the Manager on behalf of the Company. Except as otherwise agreed
to by
the Manager, the Company will expressly assume the following expenses:
|
| i. |
brokerage
and trading commissions;
|
| ii. |
all
fees associated with the performance of assay testing by independent
laboratories;
|
| iii. |
warehouse
or storage facilities costs, transportation costs, storage and
transportation insurance fees, commission fees, security services costs,
and other charges arising upon the holding, purchase, lending or sale
of
indium or other Company assets;
|
| iv. |
office
facility fees (including office rental, services and
supplies);
|
| v. |
directors
and officers liability and key man insurance
policies;
|
| vi. |
legal
and audit fees, including SEC related
fees;
|
| vii. |
corporate
finance offering costs;
|
| viii. |
fees
payable for listings, the maintenance of listings and filings or other
requirements of stock exchanges on which any of the Company’s securities
are listed or quoted;
|
| ix. |
cost
associated with printing and mailing financial reports and materials
for
Stockholders’ meetings, valuations, reporting to Stockholders, securities
regulatory filings and any other purposes required by law;
|
| x. |
fees
payable to any registrar and transfer agent of the common stock or
other
securities;
|
| xi. |
all
taxes (including income, capital and sales taxes);
and
|
| xii. |
all
other fees and expenses related to running and operating the Company,
unless specifically excluded herein.
|
| 2. |
Term.
Unless earlier terminated pursuant to Section 3 below, this Agreement
shall remain in effect for a term of five (5) years, or ______ __,
2013.
This Agreement may be renewed on terms mutually acceptable to each
party
upon 90 days written notice prior to the expiration of such term.
|
| 3. |
Termination.
|
| a. |
By
Both Parties.
This Agreement may be terminated by mutual consent of the parties upon
90
days written notice.
|
3
| b. |
By
the Company For Cause.
The Company may terminate this Agreement for Cause by action of the
Board
of Directors upon written notice to the Manager at any time. “Cause” shall
mean:
|
| i. |
If
any member of the Manager (x) has been convicted of, or entered into
a
plea of guilty or nolo contendere for a felony or other serious crime
or
crime involving moral turpitude, or any knowing violation of any federal
or state banking, securities or tax law or regulation (y) is determined
by
a court of law to have committed a willful act of embezzlement, fraud
or
dishonesty (with respect to the Company or any of its affiliates or
any of
their customers or suppliers) which may adversely affect the Company’s
financial, market, reputation and other interests in any material manner;
or
|
| ii. |
Manager’s
repeated material non-compliance or breach of this Agreement, in
connection with Manager’s duties hereunder, after written notice thereof
from the Board of Directors, and such material non-compliance has not
been
cured within 90 days after Manger’s receipt of notice thereof from the
Board of Directors.
|
Notwithstanding
the foregoing, the Manager shall not be terminated for Cause pursuant to this
Section 3(b) without (i) reasonable notice to Manager setting forth the reasons
for the Company’s intention to terminate for Cause, and (ii) an opportunity for
Manager, together with counsel, if any, to be heard before the Board of
Directors.
| c. |
By
Manager.
|
| i. |
Manager
may terminate this Agreement by written notice to the Board of Directors
if (x) either Xxxxx X. Xxxxxxxx, Xxxxxxx Xxxxx or Xxxx Xxxxxxxx is
terminated as a director or executive officer position held with the
Company, without the prior written consent of such respective individual,
other than for Cause and (y) the Board of Directors has not, within
30
days of such removal, given notice of termination of this Agreement
pursuant to Section 3(b).
|
| ii. |
Manager
may terminate this Agreement upon 30 days written notice to the Board
of
Directors if there is a Change in Control of the Company. For purposes
of
this Agreement, Change in Control shall mean (i) the acquisition of
50% or
more of the then outstanding voting stock of the Company in a single
transaction or series of transactions, (ii) members of the incumbent
Board
of Directors cease to constitute a majority of the Board of Directors
without the approval of the remaining members of the Board of Directors
or
(iii) reorganization, merger or consolidation where all or substantially
all holders of the outstanding voting stock of the Company do not,
after
such reorganization, merger or consolidation, own more than 50% of
the
then outstanding voting stock of the resulting entity.
|
4
| d. |
Liquidation,
Dissolution or Bankruptcy of the Company.
This Agreement shall terminate upon the completion of the dissolution,
liquidation, winding-up, bankruptcy, sale of substantially all of the
assets, sale of the business or insolvency proceeding commenced by,
or on
behalf of, the Company.
|
| 4. |
Effects
of Termination.
|
| a. |
Company
Termination (other than for Cause); Manager Termination.
If (A) Manager is terminated by the Company (other than for Cause)
or (B)
Manager terminates the Agreement pursuant to Section 3(c) then the
Manager
shall receive that portion of the Management Fee payable to the effective
date of termination plus an additional amount equal to:
|
| i. |
one
year’s Management Fee calculated based upon (y) an average of the
Company’s monthly NMV over the previous twelve (12) month period prior to
termination (z) multiplied by twelve (12); or
|
| ii. |
in
the event that this Agreement is terminated prior to twelve (12) months
of
service, the Manager shall be entitled to an additional Management
Fee
calculated based upon (y) an average of the Company’s monthly NMV over the
previous months of service (z) multiplied by the number of months of
service.
|
| b. |
Company
Termination for Cause.
If Manager is terminated by the Company for Cause pursuant to Section
3(b), no further payments of the Management Fee shall be paid after
the
effectiveness of termination under Section 3(b) is given by the Board
of
Directors to the Manager.
|
| 5. |
Non-Competition;
Confidentiality; Disclosure of Information.
|
| a. |
Non-Competition
and Non-Solicitation.
Without the prior written consent of the Board of Directors, Manager
shall
not, and they shall cause their, affiliates to not, directly or
indirectly, so long as the Manager is retained hereunder and until
the
one-year anniversary of any termination of this
Agreement:
|
| i. |
interfere
with, disrupt or attempt to disrupt any then existing relationship,
contractual or otherwise, between the Company or its subsidiaries and
any
of their customers, suppliers, clients, executives, employees, vendors,
licensees or business relations or other persons with whom the Company
or
its subsidiaries deal or in any way disparage the Company to any of
the
foregoing; or
|
| ii. |
solicit
for employment, attempt to employ or assist any other entity in employing
or soliciting for employment any employee or executive who at the
termination date was employed by the Company or its subsidiaries.
|
5
| b. |
Intellectual
Property Rights.
Manager hereby acknowledges that any material produced by or upon the
instructions of Manger during the term that benefits the Company shall
be
“works for hire” to the extent applicable and belong to the Company to the
extent such materials are in the nature of inventions or other items
of
intellectual property. Manager agrees to take any and all steps reasonably
requested by the Company to ensure that title thereto shall be fully
vested in the Company and agrees to make no claim to personal ownership
thereof.
|
| c. |
Confidentiality.
During the term of Manager’s retention hereunder and thereafter, and
except as required by any court, supervisory authority or administrative
agency or as may, in the opinion of Manger’s counsel, be otherwise
required by applicable law, Manager shall not, without the consent
of the
Board of Directors or a person authorized thereby, disclose to any
person,
other than a then-current employee of the Company or a person to whom
disclosure is reasonably necessary or appropriate in connection with
the
performance by them of the obligations hereunder, any confidential
or
proprietary information of the Company, including any vendor from which
the Company purchases, or potentially purchases, indium from, and
customers, or potential customers, in which the Company may sell indium
to, obtained by them during the term of this Agreement, unless such
information has become a matter of public knowledge at the time of
such
disclosure.
|
| 6. |
Indemnification.
|
| a. |
The
Company agrees to indemnify Manager and hold Manager harmless against
any
and all losses, claims, damages, liabilities and costs (and all actions
in
respect thereof and any legal or other expenses in giving testimony
or
furnishing documents in response to a subpoena or otherwise), including,
without limitation, the costs of investigating, preparing or defending
any
such action or claim, whether or not in connection with litigation
in
which Manager is a party, as and when incurred, directly or indirectly
caused by, relating to, based upon or arising out of any work performed
by
Manager in connection with this Agreement to the full extent permitted
by
the New York Business Corporation Law and by the Certificate of
Incorporation and By-Laws of the Company, as may be amended from time
to
time.
|
| b. |
The
indemnification provision of this Section 7 shall be in addition to
any
obligations which the Company may otherwise have to
Manager.
|
| c. |
The
Company agrees to indemnify Manager and hold Manager harmless against
any
and all loss of opportunity whereby the value of any of the Company’s
assets or value of any particular indium, monetary or currency investment
could have been increased, or any decline in value of any of the Company’s
assets unless such decline is the result of the Manager’s gross
negligence, willful misconduct or willful failure to comply with express
directions given by resolution of the Board of Directors or the Company’s
stockholders.
|
6
| d. |
If
any action, proceeding or investigation is commenced as to which Manager
proposes to demand such indemnification, Manager shall notify the Company
with reasonable promptness. Manager shall have the right to retain
counsel
of Management’s own choice to represent Manager, and the Company shall pay
all reasonable fees and expenses of such counsel; and such counsel
shall,
to the fullest extent consistent with such counsel’s professional
responsibilities, cooperate with the Company and any counsel designated
by
the Company. The Company shall be liable for any settlement of any
claim
against Manager made with the Company’s written consent, which consent
shall not be unreasonably withheld or delayed, to the fullest extent
permitted by the New York Business Corporation Law and the Certificate
of
Incorporation and By-Laws of the Corporation, as may be amended from
time
to time. No such settlement of any claim shall be made by Manager without
the written consent of the Company, which consent shall not be
unreasonably withheld or delayed.
|
| 7. |
Notices.
Notices delivered pursuant to this Agreement shall be in writing, and
shall be deemed to have been duly given when (a) delivered by hand;
(b)
sent by facsimile (with receipt confirmed), provided that a copy is
promptly thereafter mailed by first-class prepaid certified mail, return
receipt requested; (c) received by the addressee, if sent with delivery
receipt requested by Express Mail, Federal Express, other express delivery
service or first-class prepaid certified mail, in each case to the
appropriate addresses and facsimile numbers set forth below, or to
such
other address(es) or facsimile number(s) as a party may designate as
to
itself by notice to the other party.
|
If
to the
Company:
000
XxXxxxxxx Xxx.
Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
If
to the
Manger:
Specialty
Metals Group Advisors LLC
000
XxXxxxxxx Xxx.
Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
In
each
case, with a copy to:
Ellenoff,
Xxxxxxxx & Schole LLP
000
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxx Xxxxxxxx
Facsimile:
(000) 000-0000
7
| 8. |
Governing
Law.
This Agreement shall be governed by the laws of the State of New
York.
|
| 9. |
Waiver
of Jury Trial.
EACH PARTY TO THIS AGREEMENT UNCONDITIONALLY WAIVES ITS RIGHTS TO A
JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY RELATED DOCUMENTS, ANY
DEALINGS BETWEEN OR AMONG THEM RELAING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
|
| 10. |
Assignability.
The Company nor the Manager may not assign this Agreement without the
prior written consent of the respective party. Except as provided in
Section 1 of this Agreement, in the event that the Manger elects to
delegate any of its duties or obligations under this Agreement to any
third-party or independent contractor, the Manager shall do so at the
Manager’s own expense.
|
| 11. |
Enforcement,
Separability.
It is the desire and intent of the parties hereto that the provisions
of
this Agreement shall be enforced to the fullest extent permissible
under
the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in case any provision of this
Agreement shall be declared invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby. To the extent that
a
restriction contained in this Agreement is more restrictive than permitted
by the laws of any jurisdiction where this Agreement may be subject
to
review and interpretation, the terms of such restriction, for the purpose
only of the operation of such restriction in such jurisdiction, shall
be
the maximum restriction allowed by the laws of such jurisdiction and
such
restriction shall be deemed to have been revised accordingly herein.
|
| 12. |
Titles
and Subtitles.
The titles of the paragraphs and subparagraphs of this Agreement are
for
convenience of reference only and are not to be considered in construing
this Agreement.
|
| 13. |
Counterparts.
This Agreement may be executed in any number of counterparts, each
of
which shall be an original, but all of which together shall constitute
one
instrument. This Agreement and each other agreement or instrument entered
into in connection herewith or therewith or contemplated hereby or
thereby, and any amendments hereto or thereto, to the extent signed
and
delivered by means of a electronically confirmed facsimile transmission,
shall be treated in all manners and respects as an original agreement
or
instrument and shall be considered to have the same binding legal effect
as if it were the original signed version thereof delivered in person.
|
8
| 14. |
No
Strict Construction.
The parties hereto have participated jointly in the negotiating and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed
as if
drafted jointly by the parties hereto, an no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
|
| 15. |
Miscellaneous.
This Agreement contains the entire agreement of the parties relating
to
the subject matter hereof and supersedes any other agreements entered
into
between the Manager and the Company prior to the date of this Agreement
relating thereto. This Agreement may not be altered, modified, amended
or
terminated except by a written instrument signed by each of the parties
hereto. No term or provision hereof shall be deemed waived and no breach
consented to or excused, unless such waiver, consent of excuse shall
be in
writing and signed by the party claimed to have waived, consented or
excused. A consent, waiver or excuse of any breach shall not constitute
a
consent to, waiver of, or excuse of any other or subsequent breach
whether
or not of the same kind of the original breach.
|
9
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement as of the day and year first above
written.
By:_________________________
Name:
Xxxxx X. Xxxxxxxx
Title:
President
SPECIALTY
METALS GROUP
ADVISORS
LLC
By:_________________________
Name:
Xxxxx X. Xxxxxxxx
Title:
Manager
Acknowledged
and Agreed:
_____________________
Xxxxxxx
Xxxxx
_____________________
Xxxx
Xxxxxxxx
10
SCHEDULE
1
Unionmet
(Singapore) Limited:
1. So
long
as members of the Manager holds an interest in Unionmet (Singapore) Limited,
any
and all proposed transactions to be executed between the Company and Unionmet
(Singapore) Limited must be reviewed and approved in the following
manner:
| a. |
Xxxx
Xxxxxxxx must review any proposed transactions on behalf of the Manager,
determine whether to approve such proposed transactions, and, if approved
by Xx. Xxxxxxxx, recommend such proposed transactions to the Unionmet
(Singapore) Limited Negotiation and Agreement Committee of the Company
for
their approval by the Company.
|
| b. |
The
Unionmet Singapore Limited Negotiation and Agreement Committee, which
is
comprised of three independent members of the Board of Directors of
the
Company, will review the recommended proposed transactions from the
Manager, and determine whether to approve such transactions.
|
Once
the
proposed transactions have been approved in accordance with sections (a) and
(b)
above, the Manager may execute any and all documents regarding such proposed
transactions with Unionmet.
