EXECUTION COPY
ACCOUNT MANAGEMENT AGREEMENT
----------------------------
This Account Management Agreement (the "Agreement") is entered into as
of the 8th day of November, 2005, by and between CD Capital Management LLC, a
Delaware limited liability company ("CD Capital"), and NWFP I LLC ("Client").
1. ACCOUNT. Client has established a brokerage account (the
"Account") with Xxxxxxx Xxxxx (the "Broker"). Client will fund the Account with
an initial $[*] million in cash. The Client may make additions to, but not
withdrawals from, the Account at any time.
2. AUTHORITY. Client authorizes CD Capital to direct the investments
of and for the Account on a discretionary basis, without prior consultation with
Client, in accordance with the Investment Objectives (defined below) and subject
to such limitations and restrictions set forth in Paragraph 4 below and such
other limitations and restrictions as Client may hereafter impose by notice in
writing to CD Capital. This discretionary authority makes CD Capital the agent,
beneficial owner (as defined in applicable securities law) and attorney-in-fact
with full power and authority in connection with the Account to buy, sell,
exchange, hold, vote and otherwise trade in any and all stocks, bonds and other
securities (including, for the avoidance of doubt, options) as CD Capital may
select, subject to the aforementioned limitations. The authority of CD Capital
under this Agreement shall continue until receipt of written notice of its
termination by Client.
3. INVESTMENT OBJECTIVES. Client hereby instructs CD Capital to
manage the Account in accordance with the "Investment Objectives" described in
Schedule l attached hereto until such time as CD Capital receives revised
written instructions signed by Client.
4. LIMITATIONS. Without the prior written direction of Client, CD
Capital shall not:
(1) buy, sell, sell short or otherwise trade or invest in or
take a position in any securities or any derivatives thereof of
issuers (or their parent or subsidiary companies) identified in
Client's "Watchlist," an initial copy of which is attached as Schedule
2 hereto (which Watchlist will be updated by Client from time to time
and provided to CD Capital); or
(ii) make any investments which could result in any unrelated
business taxable income, as defined in Section 512 of the Internal
Revenue Code of 1986, as amended (the "Code"), including, without
limitation, any investments (such as investments purchased on margin)
that could result in any debt financed income (as defined in section
514 of the Code).
5. EXPENSES. CD Capital shall enter orders for the Account with the
Broker or any other executing broker that CD Capital shall work through in its
discretion. All brokerage commissions and other out-of-pocket direct investment
expenses, including, but not limited to, the Account's pro rata portion of
out-of-pocket legal, consulting and due diligence expenses, reasonably incurred
in connection with transactions for the Account will be paid out of the assets
of the Account and are in addition to the Management Fee and Profit Allocation
paid to CD Capital. Any pro rata (based on the total number of shares of each
issuer managd by CD Capital across all accounts) third party expenses in excess
of S10,000 must be approved, in advance by Client.
6. MANAGEMENT FEE AND PROFIT ALLOCATION. During the term of this
Agreement, Client shall pay CD Capital: (i) a monthly management fee
("Management Fee") equal to [*]% of the Account's Net Asset Value as of the
first day of each month (including any new contribution then being made and
prior to accrual of the Management Fee being determined or of any Profit
Allocation (as defined below). Such Management Fee shall be deducted from the
Account's balance on such date; plus (ii) as of each December 31 (or the date of
termination of CD Capital's services hereunder), a "Profit Allocation" in the
amount of [*]% of any increase in Net Asset Value of the Account in excess of
the High Water Xxxx (prior to the accrual of the Profit Allocation being
determined). The "High Water Xxxx" for the Account is the highest Net Asset
Value of the Account as of any previous December 31 or the initial opening
balance of the Account (or at the date of
* Blank spaces contained confidential information that has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
termination for periods thereafter), if higher (it being understood that the
High Water Xxxx for December 31, 2005 Profit Allocation shall be the initial
opening balance of the Account). Operating expenses (including those set forth
in Paragraph 5 herein) reduce Net Asset Value for purposes of calculating the
Profit Allocation. Profit Allocations do not themselves reduce increases in Net
Asset Value for purposes of calculating subsequent Profit Allocations, i.e., CD
Capital does not have to "earn back" the Profit Allocation previously made from
the Account in order for the Net Asset Value of the Account to exceed its High
Water Xxxx and be subject to an additional Profit Allocation. Any withdrawals
made from the Account other than as of a December 31 will be assessed a
proportionate allocation at the time of withdrawal. The High Water Xxxx will be
proportionately reduced each time a withdrawal is made from the Account.
7. VALUATION. Net Asset Value of the Account shall mean the value of
the assets of the Account less the liabilities of the Account, if any, as of the
close of business on the valuation date determined in accordance with the
valuation provisions set forth in Schedule 3 attached hereto. It is understood
for the purposes hereof, that the Client shall not create any liabilities for
the Account.
8. VOTING OF PORTFOLIO SECURITIES- The Client and CD Capital will
share decisions on the voting of proxies and any other such matters that may
require a vote. Any voting decisions that cannot be agreed to by the Client and
CD Capital will then be made by the Client.
9. REPORTS TO CLIENT. CD Capital will render to Client no later than
the 10th day of each calendar month a written account statement detailing the
Account's Net Asset Value. It is further understood that the Client may access
its Account at anytime and may view the investments and assets of the Account.
In addition, from time to time, promptly upon Client's request, CD Capital shall
prepare and render to Client such other reports as Client may reasonably
request.
10. CUSTODY; SOFT DOLLARS. All transactions will be consummated by
payments to, or delivery by, Client of all cash and/or securities due to or from
the Account. The Broker, not CD Capital, shall act as custodian for the Account.
Client shall not withdraw or deposit cash and/or securities in the Account
without simultaneously informing CD Capital. Any "soft dollar" arrangement
between CD Capital and a broker relating to commissions generated by the Account
shall comply with Section 28(c) of the Securities Exchange Act of 1934, as
amended, unless otherwise consented to by the Client.
11. ALLOCATIONS. CD Capital will manage the Account's assets and
currently manages assets of other accounts. CD Capital will allocate trades
among the accounts in its sole discretion in accordance with its evaluation of
the following criteria: (i) exposure to the securities, issuer or market in
question; (ii) liquidity positions and requirements; (iii) tax considerations;
(iv) regulatory considerations; (v) relative capitalization and cash
availability; (vi) relative risk and value at risk profiles; (vii) borrowing
base considerations; (viii) historical and anticipated subscription and
redemption patterns; (ix) minimum investment criteria; and (x) investment time
horizon.
12 . UNDERTAKINGS BY THE PARTIES.
(i) Undertakings of the Client. The Client represents that it:
(a) has advised CD Capital of its Investment Objectives pursuant
to Schedule 1, subject to such limitations and restrictions set
forth in Paragraph 4 herein, which Paragraph 4 may be amended by
agreement of the parties;
(b) shall deliver to CD Capital or the Client's brokers, dealers
and trading counterparties, evidence of CD Capital's authority to
trade on behalf of the Account; and
(c) shall instruct any counterparties for the Account (including
the Broker) to send duplicate confirmations to CD Capital.
2
(ii) Undertakings of CD Capital. CD Capital represents that it:
(a) shall manage the Account at all times in material compliance
with Schedule 1 and subject to such limitations and restrictions
set forth in Paragraph 4 herein, which Paragraph 4 may be
amended by agreement of the parties; and
(b) shall consult with the Client on an ongoing basis concerning
matters relating to the Account, including, but not limited to,
review of positions, investment ideas, performance, prospects and
portfolio of the Account.
13. REPRESENTATIONS AND WARRANTIES BY THE PARTIES.
(i) Representations and Warranties of CD Capital. CD Capital
represents and warrants to the Client as follows:
(a) CD Capital is duly organized and validly existing under the
laws of its jurisdiction of organization with full corporate
power and authority to perform its obligations under this
Agreement.
(b) This Agreement has been duly and validly authorized, executed
and delivered on behalf of CD Capital and constitutes a binding
and enforceable obligation in accordance with its terms.
(c) The execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in Schedule 1 will not
constitute a breach of, or default under, the constituent
documents of CD Capital, any instrument by which CD Capital is
bound or under any order, rule or regulation applicable to CD
Capital, or any court or any governmental body or administrative
agency having jurisdiction over CD Capital.
(d) CD Capital has all United States governmental, regulatory
and exchange licenses and approvals and has effected all filings
and registrations with United States governmental and regulatory
agencies required to conduct its business and to act as described
in Schedule 1 or required to perform its obligation under this
Agreement.
(e) There is not pending, or the best of CD Capital's knowledge
threatened, any action, suit or proceeding before or by any court
or other governmental body to which CD Capital is A party, or to
which any of the assets of CD Capital is subject, which might
reasonably be expected to result in any material adverse change
in the condition, financial or (otherwise, business or prospects
of CD Capital). CD Capital has not received any notice of an
investigation regarding non-compliance by CD Capital with
applicable law,
(ii) Representations and Warranties of the Client. The Client
represents and warrants to CD Capital as follows:
(a) The Client is duly organized and validly existing under the
laws of its jurisdiction of organization with full corporate
power and authority to perform its obligations under this
Agreement.
(b) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Client and constitutes
its binding and enforceable obligation in accordance with its
terms.
3
(c) The Client has full power and authority under applicable law
to perform its obligations under this Agreement.
(d) The execution and delivery of this Agreement, the incurrence
of the obligations herein set forth and the consummation of the
transactions contemplated herein and in Schedule 1 will not
constitute a breach of, or default under, the constituent
documents of the Client, any instrument by which the Client is
bound or under any order, rule or regulation applicable to the
Client, or any court or any governmental body or administrative
agency having jurisdiction over the Client.
(e) The Client has all United States governmental, regulatory and
exchange licenses and approvals and has effected all flings and
registrations with. United States governmental and regulatory
agencies required to CONDUCT their business and to act as
described in Schedule 1 OR REQUIRED TO perform its obligation
under this Agreement.
14. EXCULPATION. CD Capital shall have no obligations to the Account
other than those expressly set forth in this Agreement and any other obligations
arising by law. CD Capital's responsibility under this Agreement is to furnish
the Account with advisory services based upon its professional skill, experience
and judgment AND CD Capital makes no representation or warranty as to the
accomplishment of any particular investment results by the Account. CD Capital,
its managers, officers, members, principals and affiliates and their respective
members, officers, EMPLOYEES and agents (collectively, "Manager Party") shall
not be liable to the Client for any claims, costs, expenses, damages or losses
arising out of or in connection with this Agreement, the Client, the Account,
and its operation other than to the extent attributable to the fraud or gross
negligence of the Manager Party, the willful disregard of the Manager Party's
duties to Client, or any violation by a Manager Party of the applicable
provisions of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the Investment Advisers Act of 1940, as amended, any
state or local securities laws or any stock exchange or NASDAQ regulations (it
being agreed and understood that if any action (or inaction) taken by CD Capital
or any other Manager Party has been previously discussed with, and agreed to
by, the Client, then such action (or inaction) shall not give rise to any
liability to CD Capital or any other Manager Party).
No Manager Party shall be liable to the Client for failure to obtain
the lowest negotiated brokerage commission rates, or to combine or arrange
orders so as to obtain the lowest brokerage commission rates with respect to any
transaction on behalf of the Account, or for failure to recapture, directly or
indirectly, any brokerage commissions for the benefit of the Account. No Manager
Party shall be liable to the Client for claims, costs, expenses, damages, or
losses due to circumstances beyond any Manager Party's control, including but
not limited to, the bankruptcy, insolvency or suspension of normal business
activities by any bank, brokerage firm or transfer agent holding assets of the
Account, or due to the negligence, dishonesty, bad faith or misfeasance of any
employee, broker, agent or sub-contractor of the Account chosen by a Manager
Party in good faith.
In no respect by way of limiting the foregoing exculpatory provisions
but rather by way of greater certainty, no Manager Party shall be liable to the
Client for any actions or omissions of any broker or dealer chosen by a Manager
Party in good faith.
15. INDEMNIFICATION. The Client shall indemnify and hold harmless the
Manager Parties from and against any loss or expense suffered or sustained by
any of them by reason of the fact that a Manager Party is or was connected in
any respect with the Account, including, without limitation, any judgment,
settlement, attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action or proceeding; provided that
the Manager Party would not have been subject to liability under Paragraph 14
hereunder or this Paragraph 15 for the conduct which led to such loss or
expense.
CD Capital shall indemnify and hold harmless the Client from and
against any loss or expense suffered or sustained by it (including, without
limitation, any judgment, settlement, attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action or proceeding) to the extent attributable to the fraud or gross
negligence of CD Capital, the willful disregard of CD Capital's duties to
Client,
4
or any violation by CD Capital of the applicable provisions of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
Investment Advisers Act of 1940, as amended, any state or local securities laws
or any stock exchange or NASDAQ regulations (it being agreed and understood that
if any action (or inaction) taken by CD Capital has been previously discussed
with, and agreed to by, the Client, then such action (or inaction) shall not
give rise to any indemnity by CD Capital).
Whether or not a party is entitled to indemnification hereunder shad':
be determined by a court, arbitral tribunal, administrative forum or mutual
written agreement of the parties.
16. CONFIDENTIAI, RELATIONSIIIP. Except as otherwise agreed between
the parties, all information and advice furnished by either party to the other
hereunder, including by or to their respective agents and employees, shall
be-treated as confidential and SHALL not be disclosed to third parties except as
required by law. It is explicitly understood that CD Capital is not providing
any tax advice in connection with the advisory services provided hereto.
17. INDEPENDENT CONTRACTOR. For all purposes of this Agreement, CD
Capital shall be an independent contractor and not an employee or dependent
agent of the Client; nor shall anything herein be construed as making the Client
a partner or co-venturer with CD Capital or any of its affiliates or other
clients. Except as provided in this Agreement, CD Capital shall not have any
authority to bind, obligate or represent the Client.
18. CONFLICTS. (i) It is understood that CD Capital and its
affiliates perform investment advisory and management services for clients other
than the Client and that CD Capital and its affiliates may for its or their own
behalf effect transactions with respect to investment interests which are the
same as or similar to those which the Client's portfolio may own.
(ii) CD Capital may give advice, take action and effect transactions
with respect to investment interests in the performance of its duties with
respect to any of its other clients or on its own (or its affiliates') behalf
which may differ from advice given to, or the timing and nature of action taken
and transactions effected with respect to, the Client.
(iii) Transactions in securities or other investment interests may be
accomplished on behalf of other clients from whom CD Capital has discretionary
authority or on its own (or its affiliates') behalf prior to the time that
recommendations or transactions in the same securities or other investment
interests may be communicated to the Client or executed by or on behalf of the
Client) and at prices which may be different than those at which transactions in
the same securities or other investment interests are executed by or on behalf
of the Client. The compensation which may be received by CD Capital and/or its
affiliates from such other accounts or profits realized on its own (or its
affiliates') behalf may differ from the compensation to be received by CD
Capital from the Client or from the profits realized by the Client's portfolio.
19. TERMINATION AND/OR ASSIGNMENT. CD Capital's management of the
Account hereunder may be terminated at any time by either party by giving
written notice to the other party. Upon termination, any unpaid Management Fee
will be prorated to the date of termination specified in the notice of
termination. The Profit Allocation for the calendar year during which the
termination occurs shall be determined based on the Net Asset Value of the
Account on the termination Date. Both such Management Fee and Profit Allocation
shall be paid on the date of termination. Thereafter, CD Capital will be
entitiled to its Profit Allocation (as if such positions were still in the
Account) and upon the Client's final liquidation of any and all positions which
were held in the Account as of the termination. From the date of termination
through the date of final liquidation of all positions in the Account, the
Client shall provide CD Capital with monthly brokerage statements detailing the
positions in the Account. For the purpose of clarity and the foregoing, Client
will pay CD Capital the Profit Allocation on any and all positions in the
Account as aforesaid but taking account of Client's (and its related parties')
buys and sells of such securities effectuated after termination and during the
one year period
5
following the termination. No assignment of this Agreement shell be made by CD
Capital, other than to affiliates, without the prior written consent of Client.
20. PATENTS, COPYRIGHTS, TRADEMARKS, AND OTHER PROPERTY RIGHTS. Any
and all inventions, improvements, discoveries, formulas, fund management,
administration, and accounting systems, processes, and computer software
relating to CD Capital's business (whether or not patentable), discovered or
developed are the sole and absolute property of CD Capital. CD Capital is the
sole and absolute owner of all patents, copyrights, trademarks, and other
property rights to those items.
21. 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, facsimile, electronic mail or another agreed upon method
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 Client Xxxxxxx Xxxxxxx, Managing Member, 0000 Xxxxxxxxx
Xxx., Xxxxx 0000, Xxxxxxxx Xxxxxxxx 00000 telephone (000) 000-0000; facsimile
(000) 000-0000. E-mail, mail to: xxxxxxxx@xxxxxxxxxx.xxx
with a copy to:
Xxx Xxxxxx
Xxxxxxxx & Xxxxx LLP
000 X. Xxxxxxxx
Xxxxxxx, XX 00000
xxxxxxx@xxxxxxxx.xxx
-------------------
000-000-0000
fax 000-000-0000
If to CD Capital: Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000; telephone: (000) 000-0000; facsimile: (000) 000-0000. Email:
xxxx@xxxxxxxxx.xxx.
22. 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 from any failure by either party hereto to assert its rights hereunder on any
occasion or series of occasions.
23. SEVERABILITY. If any provision of this Agreement, or the
application of any provision to any person or circumstarce, shall be held to be
inconsistent with any present or future law, riding, rules 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.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED
UNDER THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS.
25. SURVIVAL. Provisions of this Agreement that by their terms or by
their context are to be performed in whole or in part after termination of this
Agreement shall survive termination of this Agreement. Specifically, and without
limiting the generality of the foregoing, the obligations set forth in Sections
15, 16 and 20 shall survive the termination of this Agreement.
6
26. COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
27. 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.
(Remainder of page intentionally left blank )
7
IN WITNESS WHEREOF, the parties hereto have executed this Account
Management Agreement on the date first above written.
CD CAPITAL MANAGEMENT LLC
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Xxxx Xxxxxxxxx
President
NWFP I LLC
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Xxxxxxx Xxxxxxx
Manager
8
