Exhibit 10.18
MANAGEMENT AGREEMENT
Agreement, dated as of November _, 2004 (this "Agreement"),
between DCI Management, LLC, a limited liability company formed
under the laws of the State of New York ("Manager"), and Direct
Capital Investments, Ltd., a publicly-traded Israeli limited
liability company ("DCI").
RECITALS
WHEREAS, the principals of Manager have expertise in the
management of both public and private companies, including
without limitation, possessing knowledge and connections in
capital financing transactions, mergers and acquisitions and the
development and management of real estate assets and high-tech
companies; and
WHEREAS, DCI wishes to assure itself of the services of
Manager, and Manager is willing to provide its services to DCI
for the period and under the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, and
intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I
MANAGEMENT; CO-INVESTMENT RIGHTS; RIGHTS OF FIRST REFUSAL; BOARD
REPRESENTATION
Section 1.1 Management. DCI agrees to and does hereby
engage Manager, and Manager agrees to and does hereby accept,
engagement by DCI in connection with the management of the
operation of the business and affairs of DCI, for the period
commencing on the date hereof and ending on December, 2007 (the
"Term").
Section 1.2 Services. Manager shall render to DCI the
services described below, with respect to which Manager shall
apply its best efforts and devote such time as shall be
reasonably necessary to perform its duties hereunder and advance
the interests of DCI.
The services to be rendered by Manager to DCI shall be made
with the objective of enhancing the value of DCI, including:
1. Bringing to its attention potential or actual opportunities.
2. Alerting DCI to new or emerging companies, products or other
business opportunities which could be acquired.
3. Identifying prospective suitable merger or acquisition
partners for DCI, performing appropriate diligence investigations
with respect thereto, advising DCI with respect to the
desirability of pursuing such prospects, and assisting DCI in any
negotiations which may ensue therefrom.
4. Evaluating business strategies and recommending
changes where appropriate.
The services to be rendered by Manager to DCI shall under
no circumstances include (a) any activities which could be
deemed by the Securities and Exchange Commission (the "SEC") to
constitute investment banking or any other activities which
would require Manager to register as a broker-dealer under the
Securities Exchange Act of 1934, (b) any activities which could
be deemed by the SEC to be in connection with the offer or sale
of securities in a capital-raising transaction or (c) any
activities which directly or indirectly promote or maintain a
market for DCI's securities.
Section 1.3 Capital Investments. If DCI receives
capital, whether through the issuance of debt, equity, bank loan
or otherwise, Manager shall advise the Board of DCI as to where
and how the proceeds shall be utilized.
Section 1.4Right to Co-Invest. DCI hereby grants to Manager
the right to co-invest in DCI or in any subsidiary of DCI upon
the same terms and conditions offered to any third party
investing in DCI. Upon the investment by any third party, DCI
shall send notice to Manager of the terms and conditions of the
potential investment, and Manager shall have six months from the
consummation of such investment to invest up to 25% of the amount
of funds invested in DCI or its subsidiary on the same pricing
and other terms as the investment.
Section 1.5Right of First Refusal. The Manager hereby agrees
that all business transactions proposed to be undertaken by the
Manager shall be offered to DCI. DCI shall have ten (10) days
to agree that it will exercise this right of first refusal.
Section 1.6Board Nominees. At all times during the Term, DCI
shall cause two nominees designated by the Manager to serve as
directors on the Board of Directors of DCI.
ARTICLE II
COMPENSATION
Section 2.1 Management Monthly Fee. In consideration for
the services provided by Manager to DCI hereunder, DCI shall pay
Manager a Monthly Management Fee on the first business day of
each month during the Term. The Monthly Management Fee shall be
3% of the sum of (a) the net asset value ("NAV") of DCI and (b)
all monies invested in DCI or its subsidiaries or investments,
provided that if monies raised are invested in DCI or its
subsidiaries or investments it shall be counted in the NAV. All
computations of NAV shall include all direct and indirect
investments and subsidiaries of DCI. Furthermore, the Monthly
Management Fee shall not include any costs of DCI or its
subsidiaries or investments incurred by the Manager on behalf of
DCI and its subsidiaries or investments. Any costs incurred by
Manager on behalf of DCI in excess of $15,000 annually shall be
submitted to the Board of Directors of DCI for prior approval.
The NAV of DCI shall be calculated on a monthly basis as
follows: (i) if the asset is a public company, including without
limitation, DCI itself, then the value shall be the greater of
(y) based on the weighted average of the closing price of the
stock of said company for the previous 30-day period and (z) the
book value of the asset attributed and (ii) if the asset or
investment is a private company, then the value shall be the book
value of the asset attributed to DCI determined by the last round
of financing for said asset.
Section 2.2 Sign-On Option. As added incentive for the
execution and delivery of this Agreement and to provide
additional compensation for the services provided by Manager to
DCI, DCI hereby grants Manager an option (the "Option") to
purchase 125,000 of ordinary shares of DCI per each 12-month
period of the Term. The Manager shall have the right to purchase
125,000 shares on each of the first, second and third anniversary
of the date hereof. The exercise price per ordinary share of DCI
shall be based on $1 per share.
If during the Term DCI issues shares which does not result
in an increase in the NAV of DCI, the Option shall be increased
so that the Manager receives the same equity percentage in DCI
which 125,000 shares is equal to on the date hereof. For example,
if DCI issues 100,000 shares to its officers for services
provided (i.e., without cash consideration), the Option shall be
for 225,000 shares.
Section 2.3 Bonus Option. As a bonus for the services to
be provided by Manager to DCI, DCI hereby grants Manager an
additional option (the "Bonus Option") to purchase the increase
in the NAV of DCI annually. The Bonus Option shall vest and be
exercisable at the end of each 12-month period of the Term. The
exercise price of the Bonus Option shall be $1 per share, and the
amount of shares subject to the Bonus Option each year shall be
15% of the difference between the NAV of DCI for each 12-month
period thereof. For example, if the NAV of DCI on the date hereof
is $4 million and the NAV of DCI on the 12 month anniversary of
the date hereof is $10 milllion, then the Manager shall have the
right to purchase 900,000 (15% times $6 million) shares at $1 per
share.
Section 2.4 Precondition. A condition precedent to DCI's
obligation to pay any of the compensations to Manager as set
forth above shall be that the Manager must secure a $5 million
standby equity distribution agreement acceptable to the Board of
Directors of DCI. DCI acknowledges that said condition has been
met as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; CONFIDENTIALITY
Section 3.1 Organization and Standing. Each of the
undersigned has been duly incorporated and is validly existing
and in good standing under the laws of its respective state of
incorporation and has the requisite corporate power and authority
necessary to own its properties and to conduct its business as
presently conducted, to deliver this Agreement and any other
agreements required to be executed in connection with its
performance under this Agreement and to carry out the provisions
hereof.
Section 3.2 Authority for Agreement. The execution and
delivery by each of the undersigned of this Agreement, and the
performance by each of the undersigned of its respective
obligations hereunder, have been duly and validly authorized by
all requisite individual and/or corporate action on the part of
Manager and DCI, respectively, including without limitation,
DCI's good faith efforts to obtain the approval of the DCI
shareholders and any other necessary parties. In the event DCI
does not approve of this Agreement, this Agreement shall be
cancelled and neither party shall have any obligation or
responsibility to the other. This Agreement, when executed and
delivered, will be legally valid and binding obligations of each
of the undersigned, enforceable against it, respectively, in
accordance with their terms. The execution and delivery of this
Agreement by each of the undersigned and the performance of their
respective obligations there under do not, as of the date hereof,
(i) conflict with or violate the provisions of its respective
formation documentation, (ii) require any filing with, or any
permit, authorization, consent or approval of, any governmental
entity, (iii) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, lien,
encumbrance or other arrangement to which the undersigned is a
party or by which it is bound or to which its respective assets
are subject, or (iv) violate or contravene any applicable
statute, rule or regulation applicable to it or any order, writ,
judgment, injunction, decree, determination or award.
Section 3.3 Option. DCI represents and warrants that it
shall at all times reserve and maintain a sufficient number of
ordinary shares with respect to the exercise of the Option and
Bonus Option, and upon issuance of the ordinary shares pursuant
to the Option and Bonus Option in accordance with the terms and
provisions hereof, such shares shall be duly authorized, fully
paid and non-assessable and free from all taxes, liens and
charges with respect to the issue thereof. At all times that the
Option and Bonus Option can be exercised by Manager, DCI will
have authorized and reserved 100% of the number of ordinary
shares needed to provide for the exercise of the Option and the
Bonus Option. DCI will not, by amendment of its memorandum of
association or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities,
or any other action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed by it
hereunder, but will at all times assist in the carrying out of
all the provisions of this Agreement and in the taking of all
such action as may required or requested by Manager in order to
protect the rights of Manager, consistent with the tenor and
purpose of the Option and Bonus Option. DCI will take all
actions as may be necessary or appropriate in order that DCI will
it may validly and legally issue fully paid and nonassessable
shares of ordinary stock to Manager upon the exercise of the
Option and the Bonus Option.
Section 3.4 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental entity
or regulatory body is required on the part of any party in
connection with the execution and delivery of this Agreement, or
any of the other transactions to be consummated as contemplated
by this Agreement.
Section 3.5 Confidentiality. Each of the undersigned
shall retain in strict confidence, and shall not use for any
purpose whatsoever, or divulge, disseminate or disclose to any
third party (other than as may be required by law) all
proprietary or confidential information received from any of the
other parties hereto, including, without limitation, financial
information, development plans, distribution methods and
channels, pricing information, business methods, management
information systems and software, customer lists, leads,
solicitations and contacts, know-how, show-how, inventions,
improvements, specifications, trade secrets, agreements, research
and development, business plans and marketing plans thereof,
whether or not any of the foregoing are copyrightable or
patentable. The parties recognize and acknowledge that in the
event of a breach or threatened breach or default by one or more
of the parties hereto of the terms and conditions of this
Agreement, including without limitation, the covenants contained
in this section of this Agreement, the damages to the remaining
parties to this Agreement, or any one or more of them, may be
impossible to ascertain and such parties will not have an
adequate remedy at law. In the event of any such breach or
threatened breach or default in the performance of the terms and
provisions of this Agreement, any aggrieved party or parties
shall be entitled to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity,
without the necessity to post a bond or prove special damages, to
enforce the specific performance of the terms and conditions of
this Agreement, to enjoin further violations of the provisions of
this Agreement and/or to obtain damages. Such remedies shall
however be cumulative and not exclusive and shall be in addition
to any other remedies which any party may have under this
Agreement or at law.
Section 3.6 Non-Circumvent. DCI acknowledges that
Manager will introduce DCI to certain of its contacts
(collectively, "Contacts") for the purpose of engaging in a
transaction with or for the benefit of DCI. DCI agrees that
without the prior written consent of Manager, it shall not
directly or indirectly conduct any business discussions with any
Contact or any representative thereof or any person or entity
introduced to DCI or any of its officers, directors, employees,
stockholders, agents or representatives by a Contact or any of
its representatives. In addition, once discussions have been
held, DCI shall not attempt to circumvent or negotiate directly
or indirectly with a Contact for the purpose of excluding
Manager.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Termination. DCI shall have the right to
terminate this Agreement and the services of the Manager prior to
the expiration of the Term. If DCI terminates this Agreement
prior to the first full 12-month period of the Term, the
termination shall not affect or in any way impair any of the
rights of the Manager to receive its compensation to which it is
entitled for such period - specifically, (i) it shall receive the
Monthly Management Fee for the full 12-month period, (ii) it
shall have the right, on each anniversary of the date hereof, to
exercise the Option to purchase the shares of stock as provided
in Section 2.2 above and (ii) on each anniversary of the date
hereof during the Term, the Manager shall have the right to
exercise the Bonus Option as provided in Section 2.3 above.
Section 4.2 Amendments, Waivers and Consents. Any
provision in the Agreement to the contrary notwithstanding, and
except as hereinafter provided, changes in, termination or
amendments of or additions to this Agreement may be made, and
compliance with any covenant or provision set forth herein may be
omitted or waived, if all the parties hereto consent thereto in
writing. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given.
Section 4.3Addresses for Notices. All notices, requests,
demands and other communications provided for hereunder shall be
in writing (including telegraphic communication) and mailed, e-
mailed or delivered to each applicable party at the address set
forth below their name on the signature page or at such other
address as to which such party may inform the other parties in
writing in compliance with the terms of this Article. All such
notices, requests, demands and other communications shall be
considered to be effective when delivered.
Section 4.4Effectiveness; Binding Effect; Assignment. This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided that no party may assign any of its rights or
obligations under this Agreement without the prior written
consent of the other parties hereto.
Section 4.5 Prior Agreements. This Agreement constitutes
the entire agreement among the parties and supersedes any prior
understandings or agreements concerning the subject matter
hereof.
Section 4.6 Severability. The provisions of this
Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of
the provisions or part of a provision contained therein shall,
for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of
such Agreement and such invalid, illegal or unenforceable
provision shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of a provision, had
never been contained herein, and such provisions or part reformed
so that it would be valid, legal and enforceable to the maximum
extent possible. Notwithstanding anything to the contrary, to
the extent that such reformation or construction of the invalid,
illegal or unenforceable provision shall adversely affect one or
more but not all of the parties, the parties not so adversely
affected shall fairly compensate such adversely affected party.
Section 4.7 Governing Law; Venue. This Agreement shall
be enforced, governed and construed in accordance with the laws
the State of Israel without giving effect to choice of laws
principles or conflict of laws provisions. Any dispute arising
out of this Agreement shall first be submitted to arbitration
before a single arbitrator sitting in Tel Aviv, Israel, said
arbitration to be conducted in accordance with the commercial
rules of the Israeli arbitration association. Judgment may be
entered upon the finding of the arbitrator in any court of
competent jurisdiction. The arbitrator shall render his or her
findings and award within 30 days of the completion of the
hearing. The award shall be in writing and shall state the
reasons for the award. The arbitrator may award costs and
expenses at his or her discretion. Each of the undersigned
hereby waives, and agrees not to assert against the other
parties, or any successor assignee thereof, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding,
(i) any claim that the undersigned is not personally subject to
the jurisdiction of the arbitrator, and (ii) to the extent
permitted by applicable law, any claim that such suit, action or
proceeding is brought in an inconvenient forum or that the venue
of any such suit, action or proceeding is improper or that this
Agreement may not be enforced in or by such courts
Section 4.8 Headings. Article, section and subsection
headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement
for any other purpose.
Section 4.9 Survival of Representations and Warranties.
All representations and warranties made in the Agreement or any
other instrument or document delivered in connection herewith or
therewith, shall survive the execution and delivery hereof or
thereof.
Section 4.10 Counterparts. This Agreement may be executed
in any number of counterparts and by facsimile, all of which
taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 4.11 Further Assurances. From and after the date
of this Agreement, upon the reasonable request of the other
party, each of the parties shall execute and deliver such
instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Management Agreement to be executed as of the date first above
written.
DCI MANAGEMENT, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, for
PEM, LLC
Title: Managing Member
By: /s/_Adam Ofek
Name: ▇▇▇▇ ▇▇▇▇, for A&C
Capital USA, Inc.
Title: President
DIRECT CAPITAL INVESTMENTS,
LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive
Officer